NEW KIDS ON THE BLOCK

By David S. Jackson/San Francisco

For more than a year, two of Silicon Valley's most outspoken maverick CEOs--Scott McNealy of Sun Microsystems and Larry Ellison of Oracle--have been promising to turn the PC industry on its ear with a revolutionary machine they call the network computer, or NC. This stripped-down, easy-to-use communications device would cost less than $500, plug seamlessly into all kinds of computer networks and lure millions of technophobic home users onto the Internet. Best of all, as far as McNealy and Ellison are concerned, it would be based on a new programming language, Java, that promises to make obsolete today's overstuffed computer operating systems and feature-heavy application programs--the bread and butter of their bitterest enemy, Microsoft CEO Bill Gates.

Now the NCs have started to arrive--Sun's JavaStation last week, Oracle's NC this week--and a few things have changed. The machines have grown a bit, at least in memory capacity. The price, in some cases, has nearly doubled. The target audience has turned out to be corporate rather than home users. And Microsoft, which was studiously ignoring the NC threat, has suddenly awakened and started making promises of its own.

First to ship is Sun's JavaStation, a sleek, streamlined machine designed to make maximum use of the Java language (which Sun developed) and the vast storage capacity of the Internet (which runs largely on Sun's computer servers). Unlike most PCs, the JavaStation has no hard drive, doesn't play CD-ROMs and takes no floppies. Users are supposed to store their personal files on the servers and download whatever little application programs (or "applets") they need directly from the Net. The price of the base machine, with one fast microSPARCII chip, starts at $750. By the time you add a keyboard and a monitor, however, the cost approaches $1,000--almost as much as a low-end Macintosh or Windows PC would cost.

Close on Sun's heels, Oracle this week is scheduled to introduce the first NC with the promised under-$500 price tag. "The PC is too expensive and too complex to ever be popular," Oracle's Ellison insists. "We need devices that are cheaper and easier to use." To that end, he is planning a whole family of Oracle NCs--all designed to draw effortlessly from Oracle's databases--including a bare-bones desktop NC for as little as $300, an NC executive phone and an NC set-top box that will plug into a standard TV, letting home viewers surf the Web and send E-mail from the comfort of their living-room couch.

Never happy to be upstaged, especially by Sun and Oracle, Microsoft and Intel called a pre-emptive press conference last Monday, one day before Sun's unveiling, to announce their version of a $1,000 network computer--one that runs on Intel Pentium chips, supports Microsoft Windows and Windows NT, and includes a hard drive, just like a standard personal computer. "I call it a PC in a corset," scoffs Sun's McNealy. "They can pull the strings as tight as they want, but it's still a PC." McNealy claims that the Microsoft-Intel initiative was organized over the weekend just to take the wind out of Sun's sails, a charge Microsoft denies.

Ironically, the company that could benefit most from all this infighting is IBM. Big Blue has been busy repositioning itself as an Internet company, and in September it announced its own under-$700 Network Station. As the predominant corporate network computer maker, "IBM is ideally situated to grab whatever market potential there is for a network-computer device," says analyst Rob Enderle of the Giga Information Group.

So how big is that potential market? Analysts say the new machines will appeal primarily to corporate users. For them the NC's best drawing card is its promise of sharply lower maintenance costs. You can pick up a desktop computer for one or two thousand dollars, but most corporations end up spending thousands more each year on hardware upgrades and software overhauls. NCs, which automatically load the latest version of whatever software they need, could put an end to all that.

Without a CD-ROM player, however, NCs will be harder to sell to the larger home-computing market. "The CD-ROM is the key to making it an entertainment device," says Nick Donatiello, president of Odyssey Ventures, a San Francisco market-research firm. "And entertainment is the 6,000-lb. gorilla in the American home. Information is just a little Chihuahua running around the living room."

For the time being, just watching the computer-industry giants fighting over their little NCs for the next few months may be all the entertainment anyone needs.