Handheld computing finds a market

Electronic News, Jan 5, 1998 by Asa Somers

New York--If industry experts are to be believed, manufacturers of handheld computers of all shapes and sizes should expect strong growth of their market space this year. Market researchers are predicting sizable sales gains, even as a possible shakeout threatens to reshape the handheld computing landscape entirely.

San Jose, Calif.-based research firm Dataquest estimates 1998 will see a 47 percent increase in worldwide sales of standard handheld devices, which include pocketable organizers such as 3Com's PalmPilot as well as more robust handheld PCs such as Casio's Cassiopeia and Phillips's Velo.

Fueling much of the expected growth will be the latest incarnation of Microsoft's handheld operating system, Windows CE 2.0, which debuted at Fall Comdex and already has nearly a dozen hardware vendors offering or pledging to offer compatible devices. Like the initial version of WinCE, Version 2.0 includes scaled-down or "pocket" versions of popular Microsoft applications such as Word, Excel, and Internet Explorer, while the devices themselves allow users to synch on-board data with the information on full-blown desktop or notebook PCs via hardware docking cradles and wireless infrared ports.

Amenities Added

WinCE 2.0 adds several amenities that many industry watchers and hardware vendors had hoped would be supported from day one, however. Most prominent of these are a pocket version of Microsoft PowerPoint and external VGA support, which together allow a user to drive color presentations on an external monitor directly from the device itself. Also among WinCE 2.0's major new features is built-in networking support.

"We are very happy with the initial response to (WinCE) 2.0," says Stacey Wueste, North American marketing manager for handheld products at Hewlett-Packard, whose two WinCE 2.0-based devices have been shipping for almost a month now. "It's really too early to get sell-through numbers, but...corporate customers are very pleased with the additions. It's just a much more realistic OS for corporate applications."

The "wow factor" of WinCE 2.0 is greatly enhanced by its support for color screens, a feature that seems to be getting corporate support as well, much to the surprise of some manufacturers.

Hewlett-Packard's 620LX and Sharp's Mobilon HC-4500, both of which sell for upwards of $800, are the two WinCE 2.0-based HPCs currently shipping with built-in color LCDs. "We have demand coming out of our ears," says HP's Ms. Wueste of the 620LX, "We're seeing exceptional corporate interest in the color screen."

Because of increased power demands of the color LCDs, this new generation of HPCs are larger and heavier than their predecessors, which were already barely pocketable. This isn't deterring corporate customers, though, according to vendors. "When folks realize what the trade-off is -- weight versus a color screen -- people just really want the screen," Ms. Wueste says.

"I think Stacey's right, says Mike McGuire, Dataquest's senior analyst for mobile computing. "Color is a huge differentiator." Sharp, too, has experienced surprising interest in the color Mobilon. "For color in particular, the reaction is very positive," says John Brandewie, marketing manager for Sharp's handheld products. "We think there's a lot of future for color."

Raises Note Of Caution

But, cautions Mr. McGuire, $800 to $900, one-pound devices that are no longer pocketable may not have serious lasting power as a product category. "(HPC's) are a bit of a 'tweener,' " he says. "I don't think they will ultimately be the dominant form factor...they're going to get squeezed out by unconsciously portable devices (such as the PalmPilot) and companion notebooks," he says.

Companion notebook is a term Mr. McGuire uses for an emerging class of machines that may look more like mini-notebooks such as Toshiba's Libretto or Hitachi's VisionBook Traveler but cost around $1,000--about half as much.

Indeed, the PalmPilot, which accounted for a stunning 66 percent of unit sales of standard handhelds for the first half of last year, according to Dataquest, has arguably revolutionized the handheld industry. The device enjoyed worldwide sales of 1.6 million units in its first year alone. Since then, the PalmPilot's success has inspired countless commercial software and shareware programs for the device and led to the introduction of copycat machines such as the Sharp SE-500 and the Avigo from Texas Instruments, both of which began shipping late last fall.

In addition, third-party companies have developed innovative hardware add-ons for the PalmPilot. Novatel Wireless's Minstrel wireless modem snaps to the bottom of the PalmPilot and allows the user to send and receive E-mail or surf the Web without a phone cord in sight. 3Com also recently announced a joint venture with Motorola and PageMart to offer the $169 Pager Card, a user-installable memory module that turns the PalmPilot into an alphanumeric pager. The Pager Card should be available early this year.

"The PalmPilot has clearly saved (handheld computing) from being relegated to being a vertical market forever, " says Mr. McGuire. Other insiders agree. "The Pilot is a very simple machine," says Kathy Mangili, director of marketing for Psion. "What Palm (the original company developing the PalmPilot) did right was never set expectations beyond what the device could do."