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The company said it has sold out of its current inventory of both the IA-1 and IA-2, will not manufacture any more until it redesigns the devices. "We will launch a refresh of this platform later this year," said Compaq spokesman Roger Frizzell. "We're looking at different features and different price points."
While sales of the IA-1 and IA-2 have faltered, Compaq believes there will be a market for the redesigned devices.
"We projected thousands of sales, it didn't exactly happen as fast as we would want," Frizzell said. "The category should survive, we believe there is a market for it."
While the devices originally cost up to $500 (£350), Frizzell said, the IA-2 is currently priced at $299 (£209) on Compaq's Web site.
As PC prices continue to drop, people are less willing to spend nearly the same amount of money on an Internet appliance. Compaq's devices have no hard drive and can only access e-mail via the Web. The company is now looking at different markets, including vertical markets and hotels, where people might not need a PC, Frizzell said.
The devices include 32Mbytes of RAM, 16Mbytes of flash memory and a display. Both devices run Microsoft MSN Companion 2.0, which allows up to nine user profiles to be created.
Users then had to subscribe to Microsoft's MSN for $21.95 (£15.39) per month for Internet access. If the user chose to use a different ISP, they still had to pay Microsoft $9.95 (£7) per month.
The IA-1 and IA-2 were sold online in the US as well as in retail outlets.