Gateway and America Online will use a processor from a startup chipmaker Transmeta and a version of the Linux operating system in a new Internet home appliance scheduled to go on sale later this year.

Gateway said the first "tethered" version of the device would go on sale at its retail stores during the fourth quarter and that wireless versions would be available some time in the future. AOL will market the new appliance, priced at under $500, directly to its subscribers.

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