Tablet PC sees steady progress in first year

It has been a year since Microsoft launched Windows XP Tablet PC Edition, but despite a quiet 12 months few are willing to...

It has been a year since Microsoft launched Windows XP Tablet PC Edition, but despite a quiet 12 months few are willing to dismiss the platform just yet.

Microsoft chairman and chief software architect Bill Gates predicted at Comdex 2001 that, "a lot of people in the audience will be taking notes with those Tablet PCs [during the 2002 event]".

Not only was the launch of Tablet PC delayed, it looks unlikely for that prediction will come true this year either.

Microsoft, perhaps predictably, feels "great" about the first year of the Tablet PC, even though the company might fall a bit short of its sales targets, said Andrew Dixon, marketing director for Tablet PC at Microsoft.

The goal was to sell 500,000 Tablet PCs by the end of the year and the company is on track to sell between 400,000 and 500,000 units.

About half of all Tablet PC sales are in the US, the other half is split between Europe and the Asia-Pacific region, he said.

Users are typically enterprises that have large numbers of employees in specific categories such as salespeople and insurance claims adjusters, said Dixon.

"Our goal is to become the next mainstream notebook PC," he said, adding that Microsoft still believes that four years from now the majority of all portable PCs will be Tablet PCs.

Microsoft anticipates a growth for Tablet PC sales. Key factors in kickstarting sales will be new devices and more software becoming available.

Barring any wildly optimistic predictions, things have gone as well as most observers might have guessed, said Stephen Baker, director of industry analysis at NPD Techworld. He sees it taking some time for the devices to expand from vertical markets to horizontal ones.

Baker would not divulge his company's estimates for unit shipments but said that sales through commercial markets such as retailers and distributors reached about 2% of the overall notebook market in the year since the device was launched.

If first-year success of the platform can be measured by the number of device makers producing Tablet PC-based computers, however, then progress can be seen.

Nine companies had devices ready for the launch on 7 November last year, and today there are around 40 companies producing Tablet PCs, according to Microsoft.

The PC maker, Gateway, already sells a machine designed by Motion Computing, but is planning to begin selling its own machine in November, said Mike Stinson, vice-president and general manager of mobile products for Gateway.

"We're pleased with the level of interest," he said. "But it's a little disappointing that because this is a new form factor, it's taking people longer to test and profile it, and they're being more cautious about rolling it out."

"Our exisitng run rate is around 8,000 to 10,000 [units] per month," said Campbell Kan, the chief officer of Acer's notebook products division.

Acer will not be able to make money on Tablet PC until volumes hit between 20,000 and 30,000 units per month for each of its three models, he said.

He cited problems, including high prices - Tablet PC devices are often at a premium over conventional notebook PCs - and a lack of applications that take advantage of the Tablet PC's functions. There is also the absence of an aggressive marketing campaign from Microsoft.

"Nobody is able to actually be profitable making the Tablet PC," said Kan.

On the software side, the applications that Kan says are needed have been slow in coming - and not just from third-party suppliers.

Only in October Microsoft launched its OneNote note-taking software, which was previewed a year ago.

Users of the company's Office productivity suite also had to wait until October and the release of Office 2003 to get Tablet PC support, but now the company has started a push to get developers behind the platform.

At its Professional Developers Conference in Los Angeles last month Microsoft gave developers a new SDK (software development kit) with tools designed to make it easier to develop for the operating system.

"People really do need to know what they can do on the Tablet PC," said Dixon.

The operating system will keep evolving too. At the Comdex trade show later this month, Microsoft is expected to provide more details about the next version of Windows XP Tablet PC Edition. Codenamed Lonestar, the latest version should ship in the first half of 2004 and offer features such as improved handwriting recognition.

Julia Lerman, an independent software developer, recently started using an Acer C110 Tablet PC and is developing a Tablet PC application for one of her clients.

"I can't get over how great the handwriting recognition was right out of the box, but it is still many times more efficient for me to type," she said.

Lerman sees forms on Tablet PCs as the greatest opportunity. "Being able to walk around with the tablet as though it was a clipboard and writing is huge."

"I think the Tablet PC needs to be more than a novelty for people to [grab hold of]. The applications, tools and utilities that developers will create are what will make this happen," Lerman said.

The entry of IBM and Dell into the market is important if Tablet PCs are to penetrate further into enterprises, said Alan Promisel, an analyst at IDC. He believes both will launch devices should there be customer demand.

Tablet PCs are helping expand the overall PC market and enabling him to sell machines to places that have not used computers before as a replacement for paper pads or forms, said Scott Eckert, president and chief executive officer of Motion Computing.

Earlier this week the company announced a deal to provide 5,000 of its Motion M1300 Tablet PCs to HealthSouth for use in workflow applications in its approximately 1,400 out-patient rehabilitation centres in the US.

"The Tablet appears to be the ultimate evolution in mobile computing," he said.

Martyn Williams, Joris Evers and Tom Krazit write for IDG News Service

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