Wednesday, November 19, 1997

Computers: Little computers, big new marketing battle

By LEE GOMES and LISA BRANSTEN / The Wall Street Journal

Long one of high-tech's graveyards for failed products, the market for hand-held computers is suddenly seeing a stampede of activity.

A new generation of the gadgets is crowding the floor of the mammoth Comdex trade show in Las Vegas. And Microsoft Corp., which struck out there several times, is back for another try to control hand-held software.

Behind the frenzy is the phenomenal success of the Palm Pilot electronic datebook and scheduler. It's inspired a new design principle: Size and simplicity are more important than whizzy technology in creating a consumer market.

Palm Computing Inc., the 3Com Corp. unit that developed the Pilot, has sold about one million of its $250 computers in 20 months, giving it 66 percent of the hand-held market, according to Dataquest Inc., a research firm.

But competitors are coming on fast. One of the most talked-about new products: the $150 Rex PC Companion from Franklin Electronic Publishers Inc. that's no bigger than two stacked credit cards. Rex users can read addresses and appointments they have downloaded from a PC, though they can't yet enter data, as they would be able to do with the $250 Pilot.

Industry veteran Philippe Kahn, whose Starfish Software Inc. help design the Rex, says data entry was gladly sacrificed for smaller size. "Microsoft asks, where do you want to go today?" Kahn quipped at a recent industry conference. "We ask, what do you want to wear today?"

Others are pursuing the same approach. Timex Corp., for example, sells a $70 watch that stores names and addresses. Cellular phones are also starting to add phone books and scheduling. An example: Finland's Oy Nokia sells a "9000 Communicator" for about $1,000. It also includes e-mail, fax and Internet access.

Approaching the market from the other direction is a new breed of "ultraportable" notebooks that are full-fledged PCs but weigh as little as two pounds, less than a third the weight of a traditional notebook computer.

Toshiba, for example, makes a two-pound Windows 95 machine for $1,500. At Comdex, Mitsubishi Electric Industries Ltd. is showing an ultrathin notebook PC called Pedion that is 0.7 inch thick but sports a 12-inch color screen, a model that may be marketed by Hewlett-Packard Co. in the U.S.

With the hand-held market galloping away, Microsoft is touting an overhaul of the software at this year's Comdex. New Windows CE 2.0 devices, made by Hewlett-Packard, Compaq Computer Corp. and others, are roughly the size of a videocassette tape and include a small keyboard and seven-inch by three-inch color screen. The company, which is using Windows CE to attack several other markets, also has versions in the works for smaller Pilotsized devices.

Hand-held products have a strategic value far beyond the sales revenue they're bringing in now. PC companies will eventually reach a sales plateau for conventional desktop and laptop machines, and whoever can set a standard in hand-held computers could create the next huge franchise.