Worldwide PC sales are flattening, and margins reducing. PC hardware & software majors have been looking at internet appliances as the next alternative. One of the first targets was the TV set-top-box market with hardware & software vendors fighting for mindspace.

Now, Palm as well as Microsoft are building software for wrist watches which will double up as personal digital assistants (PDA). Or smart watches, as they are called.

Palm's plan is to reduce the 'footprint' of the PDA to fit in a watch - for this, they have created software with a personal digital assistant, touch screen & enough memory to hold thousands of addresses & events which can fit into the smart watch.

Microsoft on the other hand, is planning to make smart watches which will also receive data over FM with automatic regular updating from an atomic clock thrown in. Microsoft has reportedly tied up with U.S. watchmaker Timex as well as Japan based Citizen.

Interestingly, U.S. watchmaker Fossil has tied up separately with both companies.

The estimated global production of wrist watches is approximately 1 billion per annum. For a global population of 6 billion, that's a replacement rate of 18%. (Replacement of course includes second & third watches, a segment which is most likely target for smart watches.) This means that a market share of 1% will translate to 10 million units!

The target market of software vendors is shifting from PCs to smart / internet appliances. Even as an increasing number of appliances are being enhanced to include powerful software & internet/data connectivity. TV set-top boxes (which will ultimately convert the TV set into a home PC), portable MP3 players (which connect & download music from the Internet) and the next generation of cellphones (with multi-media capabilities) are other examples of smart / internet appliances.

All this translates to new & interesting possibilities with business models based on individually addressable appliances. As it becomes possible to address each individual appliance (along with access to the owner's profile), news, commercial & other content will be streamed selectively to each addressable appliance. Leading to the era of narrow-casting.

And what next? Very soon, expect your refrigerator magnet to download your appointment schedule & display today's weather forecast. Along with a commercial message specially designed for you!