In an acknowledgement that sales of WebTV have fallen short of expectations, makers of the set-top Internet gizmo slashed prices this week for the first time since its introduction last fall.

- The price cuts come less than two weeks after software giant Microsoft Corp. bought WebTV Networks for $425 million with the intention of transforming the novel gadget into a mass-market product. The slim black boxes, which sit atop the TV set, enable users to retrieve electronic mail and surf the World Wide Web on their current television sets using a remote-control device.

- Sony Electronics Inc. and Philips Consumer Electronics Co. on Thursday said they cut prices by up to 25 percent for the devices, which they produce under license from WebTV Networks.

- The reductions, which will reduce store prices to about $250 from $330, come amid sluggish sales of WebTV, which was introduced last October in a rush of fanfare about its prospects. Even though it has been promoted as an inexpensive way to bring the Internet to the majority of Americans who don't own a personal computer, the introductory price apparently wasn't low enough to heat up sales.

- ``I think we have been frustrated early on that people didn't beat a path to the stores,'' said Ed Volkwein, senior vice president of marketing at Atlanta-based Philips Consumer Electronics.

- He added that $250 was ``one of the magic price points'' that could draw in consumers.

- Microsoft, the world's biggest independent software company, bought WebTV on April 6 as part of a strategy to include Microsoft technology in virtually every kind of consumer electronics device, including digital televisions and television-enabled personal computers.

- Officials at Philips, Sony and WebTV declined to comment on whether WebTV was involved in the manufacturers' decision to cut prices. Sony and Philips pay a fee to the Palo Alto, Calif.-based WebTV to license its technology and also get a cut of the monthly fee that people pay for the programming.

- A Microsoft spokeswoman had no immediate comment.

- But WebTV president Steve Perlman said at the time of the acquisition's announcement that the cost of parts in WebTV were expected to fall by the end of next year as Microsoft incorporates its technology into the devices. Microsoft will also aid in marketing WebTV, which it expects to eventually be built directly into television sets

- Manufacturers of the devices declined to discuss specific WebTV sales figures, though a Sony spokeswoman described sales as ``healthy.'' But WebTV is far from a hot new electronics product. At CompUSA's superstore store in Redondo Beach, Calif., only about eight of the devices have been sold since the products reached stores last October, said Maverick Snook, inventory control coordinator for the store.

- ``Most people are going with the PC instead of getting a WebTV hookup,'' Snook said.

- Indeed, WebTV may be getting some low-cost competition from a new breed of computers priced as low as $800. That's just a few hundred dollars more than what people would pay for WebTV: a total of $410 _ $330 for the set-top gadget in addition to an $80 remote keyboard. Tuning in to WebTV also requires a $20-a-month subscription to the service, comparable to what Internet providers charge for access through one's computer.

- Some retailers were hopeful that WebTV prices had dropped into an important price range.

- ``As a retailer, definitely sales are picking up with this price drop,'' said Tom Campbell, a spokesman for the Dow Stereo/Video Inc. chain of electronics superstores in southern California.

Source: Associated Press