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Netpliance officially discusses impact of hackers (modified 0 times) Randy Profile NPLI discusses hacking impact In the 10-Q report which NPLI filed today (8/14/2000), I noticed the following interesting remarks. I'm wondering just what percentage of the i-opener units were sold to non-subscribers. NPLI reports 44,000 subscribers; I wonder how many pieces of hardware were sold -- twice or three times that many? Here are the remarks by Netpliance: "In the past, following the sale of some of our i-opener Internet appliances, we received minimal or no subscriber fees related to these appliances because they had been purchased by persons who reconfigured them for use as a personal computer. We changed our hardware to help prevent such reconfigurations in the future. However, similar tampering with appliances and the related loss of expected subscriber fees could occur again. Due to our pricing structure and the short period of time we have been offering our i- opener service, we have experienced significant operating losses to date. If we are unable to achieve sufficient revenues from subscriber fees and other sources, we may never become profitable and our business model could fail. "We are not profitable and expect to incur future losses and negative cash flow that could cause our stock price to fall. "As of June 30, 2000 we had an accumulated deficit of $168.2 million. We have in the past, and may in the future, subsidize the sales price of our i- opener Internet appliance. However, with our i-opener 2001 membership pak, our revised pricing of our i-opener Internet appliance decreases the subsidy that we provide with respect to our customers' purchase of the i-opener Internet appliance. Our pricing structure is subject to additional future revision. "From January 1, 2000 through June 30, 2000, we generated only $4.2 million in revenues. We will need to generate and sustain dramatically greater revenues from sales of our services if we are to achieve profitability. If we are unable to achieve dramatically greater revenues, our losses will likely continue indefinitely and we may never generate profits. If this occurs, the market price of our common stock could suffer." The full Netpliance report can be reviewed here: http://www.10kwizard.ragingbull.com/fil_submis.asp?iacc=1245819 08-14-2000 08:49:56

RE:Netpliance officially discusses impact of hackers (modified 0 times) silver944 Profile 4.2 in revenues is pretty slim pickin's given that they are currently generating a big fat 0 from i-opener sales and hence new sign-ups. further, i suspecxt that there are a lot of 3 month tos folks out there who will bag it when their 3 months are up. o well, you aren't guaranteed a win, you are just guaranteed an at-bat. in some sense a shame, i would like to see more folks out on the web buying from my commercial site, but se la guerre. 08-14-2000 15:13:02

RE:Netpliance officially discusses impact of hackers (modified 0 times) area51 Profile If NP was a real company, they would have to pay their bills as they went along, and that 4 million would be a good start to keep them going. I could run a nice company with 4 million and growing. Instead, they screw up sales for other more solid companies offering applicances at sane prices and with sane subscriber fees. Then they screw up the chances of anyone else getting into comp usa with a new appliance because they make a big problem with supply. So anyone who is trying to start a GOOD company that sells appliances can thank NP for screwing it up for them. Law suits to follow, I hope. Someone should sue them for DUMPING this stuff on the market, just like chip companies did a while back. 08-15-2000 18:25:39

RE:Netpliance officially discusses impact of hackers (modified 0 times) BadFlash Profile | Email I am in a better position than most to know the true the impact of hackers on NPLI. I know how many chips I've sold and I'm betting that no more than twice that number were actually hacked. If NPLI actually has 44,000 subscribers, then the hacker community would have virtully no impact on them. We provide a nice place for the executives to blame their troubles on and no one can question them. It holds about as much truth as their statement that the V5 was unhackable by any but the most determined hacker. All they did was deny access without swapping the chip. For most, the V5 is one of the better I-O's to have. Their buisness model is flawed from the git-go. You run the numbers. If the unit costs around $400 to make, they sell it for $100 and charge $22 a month for service. It would take them at least 15 months to break even if everyone stayed with them for 15 months, and very few actually will. I can't see that selling user information will make them much money either. They haven't fouled the next at CC or CUSA. I called both and asked. Once they are ready to ship again at $400 they will be welcomed back with open arms. Only if they don't sell will they get the boot. 08-16-2000 08:46:19

RE:Netpliance officially discusses impact of hackers (modified 0 times) justme Profile Ok Badflash, I'll bite, how many (roughly) bios upgrades have you sold? If this helps, I have 5 and haven't yet ordered any (have used the awardflash program sucessfully). My guess is you're likely close to the mark, but I'd be more comfortable saying no more than 3-4 times the volume you've sold have been hacked Drum roll, and the magic number (roughly) is...?? 08-16-2000 11:20:02

RE:Netpliance officially discusses impact of hackers (modified 0 times) Linuxguru Profile | Email I'll second Justme. I have 5, and only one of them is a V5, which I updated by hot-swapping. So I did not need to buy a BIOS downgrade ROM. I'd guess the multiple is probably closer to 3-to-1 or more, given that far more V2, V3 and V4 units were shipped. Moreover, a fair number of all units landed up with Ebay speculators, who probably did not perform the mod and therefore did not purchase BIOS downgrades (there may be some tail purchases after these units get distributed on Ebay). Also, a fair number of the 44,000 subscribers may be 3-month subscribers. 08-16-2000 12:45:52

RE:Netpliance officially discusses impact of hackers (modified 0 times) redwood Profile I agree with badflash, and stated so many months ago when I was tradeing NPLI. There is no gurantee of success when you go into business, but, NPLI had the lead, Tons of free press, ie, the hacker stories.., and quite simply couldn't fill orders. Had product been available, I believe many of us would have recommended a friend/relative buy one and use the service, heck, its a good deal for a newbie, 99 + 22 a mo... But, you can't sell from an empty wagon, and that was their problem. Now many others are entering the mix, we live in interesting times, and it will be nice to see everything comming down the pike. 08-16-2000 17:37:19

RE:Netpliance officially discusses impact of hackers (modified 0 times) Randy Profile Jack, legions of people followed the easy QNXflash step-by-step to reflash their BIOS themselves. I remember several conversations in the IRC chat room where almost nobody had heard of Badflash, but almost everyone was doing the QNXflash mod. I suspect that you represent a smaller portion of hacked IOs than you may think. 08-16-2000 20:31:33

RE:Netpliance officially discusses impact of hackers (modified 0 times) BadFlash Profile | Email The problem with most of the discussion viewpoints is the same one about the blind men trying to explain what this beast (the elephant) was by touching one part of it. Was it a rope, a snake, a tree? You get a myopic viewpoint. Those that got 5 I-O's are the rare exception. Most only have one, and the next likely amount is 2. I would also say that the QNX people are rare compare to the Windows people. I have no proof, but that is true in the general population. My guess is that my customers are mostly Windows people. If you want to apply a multiplier for Windows to QNX feel free. My guess is that no more than 5000 units were hacked and I think this an upper limit with a large margin built in. The real number is probably closer to 3000. In any event if you can't handle a 15% loss of sales you should never start a buisness. Even the top number is barely 11% of actual subscribers. I believe most people thought it was worth a try, did it for 3 months, and found the screen too small and service too slow. This thing also ties up you phone line for hours and connects at random all on it's own. 08-17-2000 04:36:39

RE:Netpliance officially discusses impact of hackers (modified 0 times) Randy Profile Jack, maybe you misunderstand the QNXflash hack that was so widely circulated on the net. All of the "QNXflash" people were running Windows or Linux, and probably most ended up running Windows. Without going through the process completely, you just run QNX long enough to run QNXflash to reflash the BIOS. From there, you insert your Windows (or Linux) hard drive installation as usual. It went something like this for v1-3's -- get root easily, then allow the built-in Telnet client (yep, Netpliance included one, lol) to dial a certain well-known server that was said to have delivered some 32,000+ downloads to acquire both QNXflash 1.02 and the accompanying BIOS image. Then quit telnet; boot QNXflash; reflash; then you're done. For v4 people the hack was/is a bit different, but I'm probably saying things you and everyone already knows... so time to stop. In any event, you're right in saying that Windows users probably make up the vast majority of hacks, but it may well be that the vast majority of those Slashdot, 2600, and CNet hack enthusiasts used the QNXflash method to quickly reflash so many of those v1s, 2s, and 3s that were manufactured and sent out into the field. My guess is that there is at least one hacked i-opener out there for every subscriber they have. 08-17-2000 12:43:21

RE:Netpliance officially discusses impact of hackers (modified 0 times) Linuxguru Profile | Email Randy is right, most people who used QNXflash would not have continued using QNX, for sure. It was used only to slam, bam, thank you Ma'am. Then back to Windows or Linux after installing the hard disk. In my case, it was back to DOS or Jailbait on the Sandisk, and the HD came right off after that. In other words, a totally stock, but completely brainwashed IO on steroids (AMD-K6-III). 08-17-2000 17:54:10

RE:Netpliance officially discusses impact of hackers (modified 0 times) BadFlash Profile | Email I'm not so sure of the reaoning and I'll tell you why. The IOPENER BBS was alerted to me on 4/7/2000. The QNX flash first became available about 2 weeks later. By that time I was selling chips at a furious rate. On 4/21 I sent the 49F020 data to the fellow who wrote the QNX flash program to support the chips that I was shipping. I expected the rate of orders to dwindle to nothing following the release of QNX flash, but they didn't slow down, they just kept comming. I could tell when NPLI had run out & when they started shipping. Only the supply of I-Openers seems to effect the rate of orders. Folks familiar with UNIX/LINUX are actually few and far between. Folks that know dos/windows are pretty common. You don't seem to appreciate what a barrier the learning curve is to jump between the two. You also don't appreciate how poorly most people follow directions. What appears to you to be clear and straight forward is complete gibberish to most people. I've had lots of people ask me if there was a way to hack without buying a chip. I sent them the link to the step by step. They always ended up buying a chip. If anything close to 32,000 units had been hacked with only 44,000 subscribers it would have put NPLI down for the count. It is curious how they could loose 168 million though. Even 100,000 units at $400 a pop is only 40 million. Anyway, we are all blind men touching a different part of the elephant. The big difference is I touch a much larger group of them. 08-19-2000 15:44:43

RE:Netpliance officially discusses impact of hackers (modified 0 times) Randy Profile Jack, with all respect, you've certainly been in touch with a substantial number of people who have modified i-openers. That said, far greater numbers have indeed flashed their BIOS themselves -- even among participants on this board. I'm very hesitant to mention the source of my data, but I will go ahead and say that the 1-for-1 ratio I mentioned was first disclosed to me by an informed contact in Austin. Now, while it's true that this particular individual certainly doesn't qualify as a big shot, she certainly is in a position to know the rough numbers. As for how a company can lose $168M, you're forgetting overall startup costs, marketing and advertising expenses, payroll, and ongoing network support costs. Randy 08-19-2000 18:10:52

RE:Netpliance officially discusses impact of hackers (modified 0 times) AlainDelon Profile Badflash, on page 10 from the article it states :"Loss on subsidized appliance sales increased to $25.2 million for the six months ended June 30, 2000 as compared to $0 for the six months ended June 30, 1999, due to the initiation of appliance shipments in November 1999. " That translates to roughly 63000 units-44000 subscribers . That leaves about 19000 hacked units as far as i can see. I LOVE SHELLEY R. 08-20-2000 02:31:37

RE:Netpliance officially discusses impact of hackers (modified 0 times) Randy Profile Actually, the subsidy refers to the portion of the device cost that wasn't paid by the customer. The top two execs, McHale and Savage, have both confirmed that the cost of the device is $370. The overwhelming majority of buyers paid $99 per unit, leaving a $271 per-unit subsidy. "Loss on subsidized appliance sales increased to $25.2 million for the six months ended June 30, 2000." If you divide that accrued subsidized cost by the per-unit subsidy, you'll have a fair estimation of the number of units sold: $25.2 million divided by $271 = 92,988. Subtract the number of acknowledged subscribers from that total, and you get a good estimation of the number sold to those who haven't subscribed to the Netpliance internet service: 92,988 less 44,000 = 48,988. In other words, the figures published by Netpliance seem to jibe with the unofficial ones we're hearing, or about a 1 to 1 ratio. I suspect that the latest 10-Q filing mentions these issues because the impact was substantial and very troubling to them. Randy 08-20-2000 13:33:49

RE:Netpliance officially discusses impact of hackers (modified 0 times) silver944 Profile I suspect that 50k is a bit on the high side, but who knows? I have one hooked up as a subscriber, and it is not a service I personally would keep. The phoning on its own is totally obnoxious. They should have at least put a widget on the screen to schedule it unless you demanded a connection. There may be a number of them out there that have dropped a good faith purchase bassed on the poor service/obnoxious service of the isp. In any event, let us say that might have sold all of these to folks that used their service. At a 270$ loss, it will take them 2.5 years to recoup the loss on the equipment subsidy. (with a 50% hack rate, its 5 years.) The cash flow on a subscriber does not then go positive for about that time (they only get about 10$ per subscriber per month out of their isp fee, gte i think gets the rest) even with the ouside revenue they might get from the "pizza" key.. this is not the recipe for a company that survives. lose money on every sale, but make it up in quantity, is not a viable business plan. sure do sound like a "barney deal" to me. 08-20-2000 15:40:05

RE:Netpliance officially discusses impact of hackers (modified 0 times) phred Profile I think Randy's arithmetic is off: if I paid $99 at CompUSA for my IOpener, then Netpliance got only a fraction of that, because CompUSA has to make some profit. So say the wholesale price was about $50 to CompUSA. The loss per device is now $320 (370-50), and so they have must have sold 78,750 units. Still, with 44,000 subscribers that leaves them with 34,750 units not subscribed. Any guess as to the unit cost to CompUSA? In any case, they always said that the $99 was an introductory price, and their model was not to increase the price at some point. It's still unclear to me whether the original thinking was to sell them for the announced $399 or some other amount, but they have certainly made a big mistake: if you sell machines at a big discount ($99) to create market awareness, with the intention of reverting to a higher price later, then it does not make any sense to withdraw from the market for a month or two before you increase your prices. 08-20-2000 16:50:06

RE:Netpliance officially discusses impact of hackers (modified 0 times) Randy Profile Yep, Phred, I neglected CompUSA's cut, so I'll consider myself corrected. Interestingly that also applies to the Netpliance internet service itself. They apparently didn't build out their own national ISP, but instead resell the UUnet backbone already in place. In other words, NPLI won't make up the subsidy loss at $22 per month each; instead their take is less. Note this posting regarding just that at Raging Bull, an investor's site: http://www.ragingbull.altavista.com/mboard/boards.cgi?board=NPLI&read=1358 I'm not with those who would celebrate NPLI's many mistakes. I just hope they straighten out their business plans rather quickly so that the next 10Q report provides a more positive read. Randy 08-21-2000 14:34:11

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