Internet appliances are the next wave of computers to be bought by the public. Mr. Eid tells us how his company is serving this market.
I talked to Mr. Eid Eid back in December of 1997 when he was President of Corel Computer Corporation. Today, he is the head of his own start-up company, OE/ONE (soon to have a name change), dealing with the information appliance market. I talked to him on February 2 to learn how the new company is doing and his take on the future.
Margie: Last time we talked, you were president of Corel Computer. When and why did you leave?
Eid: Well, there were many events that influenced this. When Corel began the computer division, we steered toward a Linux strategy. We had evaluated many real-time and regular operating systems, and selected Linux early in the process as the right OS for our computers. Eventually, as time passed, we saw Java was not going to deliver on its promises; basically, Sun was very slow at delivering the goods. So, we decided to shift our strategy to building thin-client and thin servers based on Linux, and the NetWinder project was born and was doing very well. Corel at that period had acquired WordPerfect. There were many financial constraints, and Corel decided to spin off their computer division. I left the company then in the early summer of 1998. A few months later, that divesting happened and the NetWinder was sold to Hardware Computing Canada, which later became Rebel.com.Margie: Right; so then you started the new company?
Eid: No, after that I took a break and did some consulting jobs in Montréal. Then, I joined a start-up here in the U.S. early in ’99. It turned out not to be the right environment for me, so I left in June ’99 and started OE/ONE.
Margie: When Phil heard you talk at UniForum in ’98, you were talking about a fictional character called Mr. Twenty O’One and what his life would be like. I was wondering if your company name, the OE1, came from this character?
Eid: Actually, it may! I mean “one” sounded right, you know. It is only annoying now that so many companies use it. We are thinking of a name change, and in fact, we have a name in mind. If you are interested in the UniForum talk, I can send it to you, it is in the UniForum 98 report. It was in Linux–it was in the Linux Journal, August 1998! Yes, it was a vision. It was basically an internal paper written for the company that I put on our intranet. I modified it and twisted it into something that would suit the UNIX crowd and also the computing crowd. My vision is actually quite simple. Mr. Twenty O’One is an information worker, a corporate person or a regular consumer who wants a flawless flow of computing access to content and communication. So he holds this hand-held device, I actually had a picture of the device, okay? It looked a little bit like a Pilot—the Palm VII didn’t exist then—with a CDMA antenna and a little camera in it. Basically, as he leaves home, a whole chain of events happens which turn on how he deals with content and communication until he gets to work, where he connects this device to his desktop or laptop computer and downloads the information.
Margie: Are you trying to make this scenario a reality for all of us with your new company?
Eid: Yes, in fact, what I said at the end of that speech was that all these technologies are available today—only the integration is missing. The network computing paradigm or Internet, it is the way to go as long as it is served with an infrastructure like Linux, due to its robustness and openness. This is why we merged the open-source Linux with network computing in general.
Margie: Tell us about the products you are building right now: the Web Appliance One and the MMedia.
Eid: In effect, the company is not building those products, we are only building working models of those products which we will offer our customers. So the product as described is in fact a software package, but a software package that you don’t see; that is, you will not see it shrink-wrapped on the shelf. I call it OE1, which stands for operating environment, 1 being the number one. Actually, the 1 means two things. The unification, which goes back to my speech at UniForum; and two, it is the first, so there will be a second and a third.
Margie: Okay, so someone else is going to be building the machines, and you sell them the software to put on them?
Eid: That’s right. We have two target customers, but in fact they can be two in one. First are the consumer electronics manufacturers, such as Sony, Panasonic, Philips, RCA and the like. All this crowd, the multi-billion-dollar companies, missed out totally on the PC platform, and they have not yet benefited from the Internet era. Here is their opportunity. We believe the market is ready for a machine that looks much more like an appliance than a PC. These manufacturers could sell it like a TV, but it has an advantage. Since it is a smart machine, an Internet machine, they can secure revenues by establishing a link between their customers who become members and themselves. We believe those vendors deserve to own the customer relationship and the branding, rather than somebody in the middle, like Microsoft, Sun or Oracle. What we charge them for is the software license, the software, professional services to customize it, upgrade and maintenance costs.
Now the second category of customers are what I call FSPs, the full-service providers. Those are the guys like AOL or Earthlink, or they could also be those new emerging high-speed providers, or network service providers, using such things as ADSL or the cable modem. Let’s talk about those in particular. Today, when they compete in the marketplace, the only thing they compete with is raw data, raw speed, and they aren’t doing a very good job at all. In fact, I myself have a cable modem at home, and the provider wouldn’t be able to convince me on speed, because the performance is too variable and not always as smooth as a 56K modem. So what I believe is those vendors do have a value add, but the real value add is in providing a full complete service, including a portal and serving applications and content. What better way of doing it than by delivering a device that is a total solution, rather than having to rely on an installation network to install? That service cost me $150 and I had to do much of it over because the proxy didn’t work, it didn’t work with Linux, I had to go to a static IP, etc.—you know all these problems. With our approach, the OEMs can merge the cable modem with the machine—we do it for them—and they deliver a full machine for, say, $500. So the customer pays that amount, or in fact, the vendor could subsidize it in the service. For example, instead of charging people $29, they charge them $39 a month, and it covers the cost of the machine.
How do they make money? They up-sell. And the telcos, they do this already. My telco charges me $5.00 a month just for voice mail or Caller ID. Those are very simple applications, but I am still willing to pay $5.00 a month for the convenience. When the OEMs have this connection to their customers, they can then up-sell them on many other applications. It could be a personalized finance system; it could be just for possessing on-line; it could be for extra content, because they have the bandwidth, multimedia content. We want our platform to be thin enough that the OEM can build it inexpensively, but high-end enough that it gives the same experience as an iMac or a Windows 98-based Internet machine.
Margie: Would they be able to add the other software that normally comes on a PC, or wouldn’t they want to do that?
Eid: At the base level, you get a first-grade browser, which is Netscape Communicator including Java support, and the basic half-dozen non-standard contents, such as a full PDF reader, a real networks client, real video/audio, an MP3 player and even a Flash plug-in. I’m not sure yet if you’ll download it, or we’ll integrate it. So that defines at this level of delivering high-end contents.
Margie: When do you expect to have the software ready and agreements made so that people can actually go out and buy one of these machines?
Eid: Where we are at now is we have a very strong prototype that I’m showing on a notebook and machines at work. We are building half a dozen models. We’ll have the first two in a week or so. Those are working models with a neat industrial design, and they are a true Linux platform running the whole software. Most of the user interface for the laptop is pretty much done. We are working on the Linux infrastructure to make it robust and small and on the back end services, such as calendaring, voice mail and the like.
We are targeting a first software cut about four months from now. We worked first with OEMs, but have now completed the sales and business team so that we are starting to work with ISPs to bring everyone to the table.
Margie: Sounds like you are making a good start. What about the MMedia?
Eid: The second appliance, the MMedia, is the high-end one. It assumes the OEM will integrate (which is what we are doing, actually) TV tuners and other media inside the hardware—all integrated, perhaps, on the motherboard. Our software will add the capabilities of what we call personalized entertainment, such as TiVo and Replay. Thus, you can basically flip through channels, record, play back, etc.—we want the machine to look more like a TV, but a high-quality TV, a personalized TV. That is the difference between the two platforms—basically base-line and high-end multimedia.
Margie: There is a company here in Seattle that is putting out an Internet appliance like the one you are talking about. It looks like a thick book. On it they’ve actually installed a stripped-down version of Microsoft Windows NT, and I was wondering if y’all even considered doing that?
Eid: Well, I’ve always said I would love to use Windows if it had three elements in it. Number one, if it was modular enough so that you could trim it down, which I don’t believe is feasible. Number two, if Microsoft would give us and our customers full access to the source code, and number three, if it was free!
Margie: Oh, right! I don’t think that will happen soon. This other company said they would be selling the appliance for around $600. You are beating them on price by about $100. Is that the cost of the operating system?
Eid: Well, Microsoft could decide to bring the price down to $50-$60 if they wanted. In my business stand, this is one of the risk assessments: what if tomorrow Microsoft decided to make a 90% cost cut on the price of their OS? Then, it would be a threat, yes.
Margie: IDC has been reporting that the information appliance market is going to grow phenomenally in the next few years. I assume you believe this is true. Why do you believe that?
Eid: Well, what I believe is—let’s not talk dollars, let’s talk numbers—it is only a natural trend. Today, 63% of people still don’t have access to computing or the Internet, so the market penetration has been capped below 40% at about 37%. This is true for many reasons: cost, maintenance, deployment, etc. People don’t want to mess with the complexities of a fully featured computer. So the 63% of people without access now will be the target market for these appliances. And these people will buy, since the Internet has become as much an entertainment source as one for information. The numbers are predicted to be at least two or three times bigger than the PC market itself. That is not to say the PC market will shrink. By IDC’s report, it is still growing at about 9% yearly. I believe that will be sustained for a while, because the momentum behind Windows is tremendous. So, number-wise, we believe with IDC that many more people will be accessing the Internet through these alternative devices than through Windows or Macintosh machines.
Margie: Do you think Linux is going to dominate that market on these devices?
Eid: Linux has the best shot at it. The reason is ubiquity. Many operating systems have claimed the role to unseat Windows, and obviously, none of them could: not the Mac, not OS2, BeOS or NextStep. Only one OS has a chance of doing so—Linux, thanks to its open source. And also thanks to the vote of confidence from the user base and Wall Street. That vote has put enough momentum behind that operating system so that today, you could spend hundreds of millions of dollars to improve it and build applications that run on it.
Margie: It has been fairly amazing.
Eid: Yeah! Don’t you wish you had been able to be a part of these IPOs? Many of our friends and former employees work at VA Linux, and it has been good for them.
Margie: I think it is good to see these people, who have been so faithful to the Linux community for so long, actually get something back in the form of financial reward. People can’t work for free forever.
Corel also obviously has faith in the viability of this market, since they have acquired a 30% share of your company. Are the machines going to come with Corel Linux pre-installed?
Eid: Absolutely. In fact, we are still finalizing this. I’ve always said the deal with Corel was not only financial—it was multifaceted; this is because it is a great fit. Mike and I have never stopped seeing each other; we’re friends. However, we felt it best to wait until it made sense for Corel and us to enter into a relationship before making a deal. Basically, we are going to base our OS on Corel Linux and the Debian distribution, because they made so many improvements to the user interface, the browsing and other stuff. All of these improvements are very, very useful. So the high-end aspects of our device would have a Corel Linux in it and branded Corel Linux. We don’t know exactly how we are going to package it, but it is a certain thing we are going to have Corel Linux in there. Also what we have is access to source code of WordPerfect for Linux, but I can’t say much on what we are going to do with this. It is going to be very exciting.
Margie: Sure. Which browser are you planning to put in?
Eid: Mozilla, eventually. For now, we are using Netscape 4.7 until Mozilla releases and we can get on the bandwagon. We will be using all the Mozilla tools and many web-top applications, such as calendaring, a desktop, a file viewer and the like.
Margie: Do you think the predictions you were making back in 1998 at UniForum will become reality before 2001?
Eid: I picked 2001 for many reasons, but the basic one is the wireless. And the wireless has disappointed me in previous years, but now I’m very encouraged after the last couple of shows I’ve attended. Basically, things are coming together nicely to get the power consumption and the price we were waiting for, so it’s about to happen. What is not happening yet is a basic digital PCS Personal Computing Services) that fits in DMA that is low-power enough, inexpensive and serves better than 32 kilobits per second, so that the whole thing is feasible. By the end of 2001, you’ll see at least the first generation of those devices. Palm VII goes in this direction, but not far enough.
Margie:What do you now think the future holds for Linux and OE/ONE?
Eid: For Linux, consolidation in two or three major vendors who will dominate their respective market segments. Broader application/hardware support for Linux, which will make it a true alternative to Windows on the desktop. Corel’s work on the desktop and its rich set of applications will greatly help the Linux cause.
I expect OE/ONE to lead the way in the consumer electronics computing era. Our vision is to unify the way information, content and traditional applications are accessed and enjoyed. Our realistic goal is to eliminate the complexity from simple daily computing tasks. Using an information appliance should be as easy as turning on a TV and as fun as playing with a gaming console. OE/ONE will achieve this with the help of our current and future strategic partners.
Margie: Anything else you would like to tell us about that I haven’t asked you?
Eid: We always want to remind people that we are, after all, a Linux company. So even though the market we are addressing is a consumer market, we want to hide the complexity of Linux as much as we can from the users. But if it weren’t for open source, and Netscape Communicator coming to open source through Mozilla, you wouldn’t see OE1 or companies like OE1 around today.
Margie: Thanks for your time. I am sure you will find success in your venture.