(FORTUNE Magazine) – It's 6 A.M., and you've just popped a mug of water into the microwave for tea. While you wait for it to boil, you check up-to-the-minute stock quotes--from the front panel of your Internet-connected microwave.

Lunacy? Cisco Systems would have you believe it's a likelihood. The company whose networking gear powers 80% of the Internet backbone is looking for new territory to conquer. It's betting that if some of the world's toasters and televisions and coffeemakers get wired with Cisco Networks software, the builders of the Internet will ramp up their purchases of Cisco's really expensive routers.

It's part of Cisco's plan to connect everyone and everything using standard Internet protocols. If Cisco succeeds, consumer appliances--and the personal networking they enable--may be the foundation for a new class of applications, making Cisco the Microsoft of what some experts are calling the post-PC world.

To get the word out that Cisco is serious about the home, its chairman, John Chambers, unveiled the plan at the beginning of January in a keynote at the annual Las Vegas consumer extravaganza, the Consumer Electronics Show. He even showed a video of a net-connected microwave oven (actually available for just $50,000 from NCR). On a perhaps more relevant note, he also announced a deal with AT&T and TCI, valued at slightly under $100 million. Cisco will provide the telco with equipment to route phone, Internet, and video traffic over its cable lines. AT&T's ads touting the service may speak of "Cisco-powered networks."

Cisco is spreading its message via a $60 million worldwide advertising campaign filled with emotional pitches and multicultural children. The company is even hitting the streets, sponsoring a 12-city shopping-mall tour with At Home Networks to educate consumers about cable modems. Cable modems, which are generally paid for as part of the monthly cable service fee, are gaining popularity because they let you bring up Web pages about 100 times faster than with the typical 28.8 phone modem connection. "We want to make Cisco synonymous with the Internet," says Keith Fox, Cisco's vice president of advertising.

For now, Cisco's making a lot of fuss over a tiny market. It gets less than $10 per license for the Cisco Networks software. The highest-volume seller of cable modems, Samsung, ships a mere 15,000 units each month. But market research firm Dataquest sees the market for connected consumer devices growing rapidly. The firm forecasts that about six million homes will be networked by 2002, up from a measly total of 15,000 today.

The AT&T and Samsung deals reflect Cisco's strategy of licensing its software to partners rather than introducing its own products. This strategy works, says Mark Stubbe, vice president of Samsung's networks division in Dallas. "Working together, we're able to get new technology and new services out quicker than we could individually."

Despite the huge promotional push, there's less behind the curtain than you'd think. Cisco hired a chief for its personal networks division just this summer, and so far she and her assistant are the only two people in her organization. "This is a virtual organization within an actual 17,000-person corporation," says Robba Benjamin, vice president and general manager of Cisco's consumer line of business. Benjamin, formerly an executive with Sprint and US West, has tapped a handful of people to form a "personal networks" steering committee to jump-start the organization. More than 100 business development staffers and engineers are on loan for now. Within a year Benjamin expects her group to number between 150 and 200.

A nontechie who wanted to be a Milton scholar, Benjamin says her top priority is to sign up home users for broadband networking through their cable providers, which will equip them with Cisco cable modems made by Samsung and Sony. (These modems are the first co-branded products available to consumers.) So far there are only 300,000 broadband subscribers, including users of cable modems, in the U.S., but market research firm Forrester Research predicts that number will mushroom to 15 million subscribers by 2002.

Cisco also plans to offer digital subscriber line (DSL) modems, which are speedy but not as fast as cable modems. Their main benefit? They use existing phone lines and let you make phone calls and surf the Web simultaneously on a single line. Eventually a simple device dubbed a "residential gateway" will control home electronics--from home or remotely over the Internet.

Once all these fast connections are in place, new applications will be built that we haven't dreamed of, Benjamin says. No longer will you have to go back to the kitchen to check on the progress of a roast. Instead, digital probes will send a temperature and time update to your personal digital assistant or your TV.

Before we reach this futuristic nirvana, of course, there are a couple of mundane details to take care of. For one, how is Cisco going to connect everything else in the home to the set-top box or cable modem? Benjamin isn't saying, but mentions that Cisco has invested in ShareWave, a startup making a wireless home-networking system. She also sits on its board.

Cisco has formidable competition to outrun before it can win this market. Nortel says that it has received orders for $1 billion of its one-megabit cable modems. A host of competitors--including Intel, IBM, Lucent, and Compaq--have formed the Home Phoneline Networking Alliance to come up with a way to network home computers, fax machines, stereos, and other appliances through existing phone lines. Then there's the Bluetooth alliance, comprising Motorola, Nokia, Intel, and others with a similar goal of using wireless technology. Cisco hasn't taken part in either group yet, but Benjamin says the company wants to interoperate with both wireless and wire-line systems.

Given all that, Cisco is wise to get into the market now, says DavidPaul Doyle, an industry analyst with Dataquest: "it's going to be harder to compete once Intel, 3Com, or Bay gets entrenched in that space." But making useful, rather than novelty, products is the challenge, says Michael Harris, president of Kinetics Strategics, an Internet research firm in Phoenix. "Conceptually, Cisco can make devices talk with each other--it does that every day--but the challenge is to do it in a low-cost, meaningful way," he says. Some of Cisco's ideas, while lively and imaginative, may not fit that criterion. Now, who really needs a bar-code-equipped fridge that'll tell you when to toss spoiled milk?

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