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David M. Quady is trying to save his company $90 million a year. That's the potential, at least, if the market research is correct and he can slash 30% off the cost of maintaining Norwest Corp.'s 30,000 personal computers by switching to a slimmed-down cousin of the PC--the NetPC. So in June, Quady, who helps select the computers for the Minneapolis financial services firm, decided to launch a pilot group of NetPCs, since they are supposed to be cheaper, yet similar to personal computers.

The machine is going to be more similar than Quady ever dreamed. On Sept. 8, IBM Corp., one of Quady's two suppliers, decided that demand was not strong enough to justify building a new line of NetPCs. IBM isn't giving up on the NetPC concept, however, just on plans to build one from scratch. Instead, Big Blue will modify an existing PC, seal off the floppy disk drive, and give it all the features of a NetPC, namely, software that makes it easier to distribute, monitor, and troubleshoot PC applications. That's O.K. by Quady. ''The goal is still going to be met,'' he says. ''We're still as excited about it.''

TIRE KICKING. But is the rest of Corporate America? The computer industry is trying to slim down and simplify the PC into something akin to a corporate information appliance. So far, however, NetPCs have not found a big following. And their rivals, the so-called network computer, a concept unveiled more than a year ago, is still in the tire-kicking stage at most companies.

Now it seems some PC makers aren't too jazzed about building NetPCs from the ground up. Like IBM, Micron Electronics is folding NetPC features into its existing line of PCs. Gateway 2000 says it hasn't received a single order for its product. And Digital Equipment Corp. is weighing demand for NetPCs to see whether it will go ahead with plans to make a separate product.

This could be a major blow to the NetPC camp. Just last June, companies such as Compaq, Hewlett-Packard, and IBM unveiled NetPCs--a new category of desktop machine based on a design by Microsoft, Intel, Compaq, and Dell. The NetPC is a slimmed-down, $1,000 box aimed at the corporate buyers who may be toying with the idea of switching to rival network computers, or NCs. The NCs are $750 diskless machines that get programs zapped from the server and then execute them locally, making them less expensive to upgrade than regular PCs. The NetPC, by contrast, costs a tad more, but includes a hard disk and can still have programs installed and run locally.

But analysts say the NetPC confused customers. With the new machines not due out until fall, details on prices and specifications were sketchy. Says Rob Enderle, an analyst at Giga Information Group: ''Customers felt that they were paying more and getting less.''

Not all PC makers see it that way. Dell Computer and Hewlett-Packard are still planning NetPCs by yearend. Compaq also is sticking with its timetable for unveiling a NetPC this month, although it acknowledges it's a niche product. Meanwhile, chip giant Intel Corp. says that IBM's decision is proof that the concept is catching on. Says Craig R. Barrett, Intel's president: ''The real issue is not how they bring them to market, but whether they're moving ahead.''

Slowly. So far, NetPCs have yet to ship. IBM, which also is marketing a line of NCs, will sell a PC with NetPC capabilities next month. But customers are skeptical. ''I always thought the NetPC was kind of an interim product,'' says Dennis Jones, the chief information officer at Federal Express. Jones is trying out NCs in the company's call centers.

That doesn't mean NCs are speeding their way into corporations. Take Tree Island Industries Ltd. in Vancouver, B.C., a manufacturer of steel parts. The company has installed 40 NCs, but Otto K. Folprecht, manager of information systems, says they're a stopgap solution. That's because the first-generation NCs mainly run Windows applications, while later versions will use software based on Java, the programming language designed to run on all sorts of computer systems. Eventually, Folprecht expects to replace all 400 of his PCs with the next-generation NCs. ''At one point in time, everything will be NCs,'' Folprecht says.

Until that day arrives, though, computer makers may find there's not much net in either NetPCs or network computers.

By Ira Sager in New York, with bureau reports

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Updated Sept. 11, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.
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