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CIDCO's iPhone will ship first, but big rivals are at its heels

Unless you read the junk mail stuffed into your monthly phone bill, you've probably never heard of CIDCO Inc. That's because the Morgan Hill (Calif.) company relies on such mailings to sell its main product--caller-ID boxes, gizmos that attach to phones to let consumers identify incoming callers before answering. ''I didn't even know what the company did when the headhunter called,'' says former Apple Computer Inc. marketing chief Daniel L. Eilers, who joined as chief executive in March.

Some very big companies are acutely aware of CIDCO's new product, however. The $500 iPhone is a telephone that can surf the Internet. It has a 7.4-inch laptop-like screen, a mini-keyboard, and communications software that lets it match the fastest PC modem. SBC Communications Inc. is expected to start selling iPhones to its residential customers in 1998. And on Dec. 8, Salomon Smith Barney Inc. was expected to announce a plan to provide iPhones to retail-brokerage customers.

The idea behind the iPhone is to get a chunk of the roughly 60% of households that don't own PCs to try an easier route to the Web. ''Our vision is to own the kitchen countertop,'' says Eilers. His bet: that given the telephone's ubiquity, Web phones have a better chance in cyberspace than gizmos such as Microsoft Corp.'s WebTV. Yankee Group Inc. analyst James P. Penhune expects U.S. Web-phone sales to hit 9.9 million by 2002.

There are plenty of hurdles left. The iPhone's $500 price tag is dangerously close to plummeting PC prices, and CIDCO's anonymity won't help as rivals such as Philips Communications Ventures and Northern Telecom jump in. Moreover, at 25 seconds to reach a Web site, the iPhone is slower than thumbing through the Yellow Pages. Still, as the first Net telephone on the market, the iPhone should help $249 million CIDCO finally make a name for itself.

By Peter Burrows in Morgan Hill, Calif.


CHART: Opportunity Calling


Updated Dec. 4, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.
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