AICTC Information Appliance and Market Perspectives What Are Information Appliances? Information Appliance Market Dynamics IA Revenue Streams & Business Models Information Appliance Market Potential 2010 IA Scenario and Summary

AICTC What is Information Appliance? An inexpensive device An easy to use device Based on computer technology Dedicated to do one or a few functions An application-specific computer Most devices will have Internet access and may be called Web Appliances

AICTC An Information Appliance Segment Add-On IAs Existing devices with IA functions added: Web set-top boxes Web digital TVs Web cellular phones Web screen phones Personal VCRs/DVRs New IAs New devices or form factors with IA functions: Web PDAs & PDAs Web terminals Web pads Web music players Electronic book readers

AICTC Information Appliance Types Web/Internet IAsProducts designed to access the Internet. Other functions may also be included. Communications IAs Products designed for communications plus web access or other IA functions Entertainment IAs Products designed for entertainment plus web access or other IA functions Computing IAsProducts designed for single/few PC functions. Other IAsProducts designed for new functions. IAs are standalone or built into existing products

AICTC Information Appliance Examples IA Types Information Appliance Examples Web/Internet Web Terminals Web Terminals MSN Companions IAs MSN Companions IAs Web Pads Web Pads AOL Companions AOL Companions Communications Web Cellular Phones Web Cellular Phones Web Screen Phones IAs Web Screen Phones IAs Web Video Phones Web Video Phones Stations Stations Entertainment DVRs Web Set-Top Boxes Web Set-Top Boxes Web Music Players IAs Web Music Players IAs Web TVs Web TVs Personal DVRs Personal DVRs Computing IAs PDAs & Web PDAs PDAs & Web PDAs Thin Clients Thin Clients Handheld Computers Data Collection IAs Handheld Computers Data Collection IAs Other IAs Electronic Book Readers Electronic Book Readers Car IAs (Telematics) Car IAs (Telematics) Medical IAs Medical IAs Vertical Market IAs Vertical Market IAs

AICTC IA Product Overlaps

AICTC IA Driving Forces

AICTC IA Market Characteristics

AICTC IA Market Dynamics

AICTC IA Hindsight

AICTC IA Business Models

AICTC IA Revenue Flow

AICTC IA Revenue Flow Estimate

AICTC IA Revenue Flow Estimate

AICTC IA Revenue Stream Perspectives IA service is the largest revenue generator: 50-80% of customers’ expenditure over products’ economic life IA purchase is 15-30% of customers’ expenditure IA aftermarket is 5-25% of customers’ expenditure More future IA services will further boost its share E- & m-commerce fees (3-10% of purchase price) will add 6-10% to total IA vendors’ revenue potential IA industry fees are proportional to each segment’s revenue size and IA users, but are difficult to estimate

AICTC IA Business Model Perspectives Recurring revenue model is preferred. Start-up companies must be early in a new segment or enter via large service companies One-time revenue products should become customers’ repeat and replacement products Two types of Internet access business models – In “Open Access” end-user controls Internet access pattern – In “Walled Garden” service provider controls Internet access pattern – Most IA customers prefer open access – ISPs prefer walled garden due to high referral fees – Walled garden is viable for small devices due to text entry problems Influence products generate multi-year customer loyalty, which generate recurring revenue (i.e. walled garden products) IA hardware device price discounting/bundling has subsided. May come back as customer spending pattern is better understood

AICTC IA Forecast Methodologies

AICTC IA Related Markets

AICTC Interactive Service Networks

AICTC IA Service Networks

AICTC Web IA: Between Rock & Hard Place Web IA expectations have been unrealistic – First business models were unbelievable – Early products need better features – High-tech slowdown forced several product withdrawals – Cost/benefit versus PCs need improvements Is there a need for web-only IAs? – Will web add-on IAs eliminate need for web-only IAs? – Will PC price decline prevent web-only IA success? Web IAs still have opportunities – Web Pads will succeed due to mobility advantage – Low-priced flat displays will help tremendously

AICTC Total Unit Shipment

AICTC World Wide: New IAs vs. Add-on IAs

AICTC IA Market Growth Perspectives Add-on IAs will have a much larger market than new, standalone IA products IA product category success will vary by region and country Current PC Internet user penetration level will impact the success of many IA product segments Web enabled devices in use will be higher than subscribers Many products will have IA functionality, but user subscriptions will lag until the user experience improves IA product features for existing web users are different from the needs of new web users “Killer apps” will vary by product segment & region/country

AICTC U.S. Telematics Potential

AICTC IA Scenario: USA

AICTC IA Scenario: Worldwide

AICTC IA Summary Perspectives