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TODD BISHOP P-I reporter

Novenber 20, 2003

Speaking at Comdex two years ago, Bill Gates said he hoped many of the conference attendees would be taking notes the next year on Tablet PCs, the pen-based, pad-style computers later introduced around a specialized version of his company's Windows operating system.

It looks as if the Microsoft chairman will have to wait a while longer.

A year after their debut, Tablet PCs aren't easy to find in the hands of average people at the trade show or most other places, with many portable-computer users still choosing traditional laptops. Microsoft says 500,000 of the Tablet PCs have been sold worldwide, meeting the company's expectations, although they haven't yet caught on among a broad range of businesses and consumers.

Instead, the biggest initial uses are in specialized industries and environments in which the Tablet PC capabilities provide clear advantages. Among other features, Tablet PCs let people take handwritten notes in digital ink in the field, as if writing on a clipboard. The notes can be left in that form or converted into typed text.

Companies in such areas as health care and insurance-claims adjustment are using Tablet PCs for that reason. Tablet PCs have also started to gain acceptance in schools and universities, in part as note-taking devices for students.

Executives overseeing Microsoft's Tablet PC initiative said they expected most of the initial users of the product to be in specific industries - vertical markets, in business parlance. As time goes on, however, the company expects to see more growth horizontally, among a broader base of general users.

"Verticals are the earliest to adopt; there's no doubt, absolutely. It gives them scenarios they just can't do today on a laptop or any other device," said Microsoft executive Peter Loforte, Tablet PC general manager. "As far as general horizontal acceptance, we're happy with the numbers. They're actually in line with our projections for the first year."

The company is starting to see more adoption among general users, and it expects even more as time goes on, said Susan Cameron, group product manager for Microsoft's Tablet PC business unit. One benefit of the Tablet PC for office workers is the ability to take notes in a meeting unobtrusively, as if scribbling on a paper notepad, without tapping on a keyboard and with no laptop screen separating the user from others in the room.

The concept is also gaining acceptance among computer manufacturers. A year ago, when the Tablet PC edition of Windows XP was released, 14 companies were making Tablet PCs, Loforte said. Today there are more than 40, he said. They include such companies as Gateway, Hewlett Packard, Toshiba and Acer.

Yet some manufacturers, such as Dell Computer, are waiting to see if the Tablet PC truly catches on before jumping aboard.

"We're finding that the market for tablets is small," said Michael George, Dell's chief marketing officer. "We're continuing to look at it, might introduce one at some point, but just haven't quite seen the demand for it yet."

Microsoft's Tablet PC effort has received some negative reviews from hardware executives and analysts. A research report by market research firm Canalys cited sluggish Tablet PC sales in Europe, the Middle East and Asia as evidence that the company needs to do more to foster the acceptance of the computers.

"Microsoft still isn't doing enough to help Tablet PC vendors - particularly in Europe," said Chris Jones, a Canalys senior analyst, in a news release issued by the firm. "Rather than pricing the Tablet PC (operating system) at a premium, adding to the vendors' costs and the end-user price, it should be doing the opposite: subsidizing the vendors to help them get the market up and running."

Microsoft's Cameron and Loforte declined to say how much more Microsoft charges manufacturers for the souped-up Tablet PC version of Windows XP than for the standard Windows XP operating system. During his keynote address here Sunday night, Gates cited the example of one Tablet PC model sold at retail for just $100 more than a laptop with the same specifications, although Cameron and Loforte said the difference in price is typically more than that.

IDG News Service this month quoted Campbell Kan, the executive in charge of Taiwan-based Acer Inc.'s notebook products, as saying that his company was not satisfied with its Tablet PC sales volume. "Nobody is able to actually be profitable making the Tablet PC," Kan said, according to the news service.

Yet no one truly expected Tablet PC sales to soar through the roof in the first year after their debut. "Expectations were pretty modest," said Alan Promisel, a research analyst with IDC. He noted that, in specific industries, Tablet PC sales have in fact been relatively good.

Rich Black, spokesman for Acer America, declined yesterday to address Kan's reported comment, but he said the company's sales volume for Tablet PCs in the United States has been "great" in the year since the launch. He said he was not able to share specific sales figures.

"It's not a platform that we think is going away, nor is it anything that we're going to stop investing in," Black said.

Acer's Tablet PCs include convertible models, which can be used either as traditional laptops or as tablets, by virtue of a rotating hinge that lets the laptop screen turn and lay flat, face up on top of the keyboard. Analysts say convertibles will be key to attracting people reluctant to completely abandon traditional laptops.

"The concept of a convertible is the next part of it that kind of kicks it into a broader audience," said Tim Bajarin, president of Creative Strategies, a technology consulting firm. The development of voice recognition technologies, letting the user control the Tablet PC with voice commands, will be another key step, he said.

But some of those who do buy convertible Tablet PCs find they end up using them almost exclusively in the form of regular laptops.

LaserFiche, a Long Beach, Calif.-based company that sells document-storage and retrieval products, brings an Acer convertible Tablet PC to show off its software at trade shows such as Comdex because "there's a little sexiness to it," said Tom Wayman, the company's marketing director. But the software doesn't have any tablet-specific features, and the company doesn't make use of the computer's Tablet PC functions in everyday business.

"From our standpoint, it just ends up being used as a wireless laptop," Wayman said, acknowledging that the company would have paid less for a standard, non-convertible laptop with the same specifications.

Such anecdotes underscore the fact that there are relatively few applications written specifically to take advantage of the Tablet PC's full array of unique features, analysts say.

Microsoft helped matters with the recent release of its OneNote note-taking program as part of its Office System 2003. OneNote, created with the Tablet PC in mind, takes advantage of inking capabilities and other Tablet PC features.

At Comdex this week, Microsoft also announced plans for a new version of Windows for Tablet PC, to be released around the middle of next year.

Improvements include better handwriting recognition and advances in the process of converting written words into typewritten text.

Previous efforts at pen-based, hand-held computing, such as Apple's Newton, ended in failure. But Microsoft executives say they are convinced the Tablet PC won't suffer the same fate. "In a couple years," said Microsoft's Loforte, "you'll be amazed at where the world's at."

P-I reporter Todd Bishop can be reached at or

(C) 2003 Seattle Post-Intelligencer. via ProQuest Information and Learning Company; All Rights Reserved

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