The write stuff

The Tablet PC OS was launched with a lot of hype last year, but where are the sales? Windows Middle East looks at how vendors are promoting the platform in the region, and examines where next for the new(ish) form factor.

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By  Peter Branton Published  August 31, 2003

Introduction|~||~||~|It used to be a corporate saying in the US that you never got sacked for buying IBM. Then Big Blue decided to work with a small company in Redmond, Seattle for its PC operating system and (more or less) ever since it is Microsoft that has been seen as the safe bet for buyers in the OS market. If its not quite true to say that when Microsoft sneezes the rest of the IT industry catches a cold, you can bet a few people look to get hankies out.

So when Microsoft launched its Tablet PC operating system last November, it was seen as potentially changing the way we all interfaced with our computers, a radical shake-up of the entire IT industry, and generally speaking a Good Thing for PC makers who were facing falling margins and lack of customer enthusiasm for upgrading desktop machines.
Tablet PC allows you to write on your computer the same way you would on paper, with an electromagnetic digitiser pen and digital ‘ink’ allowing you to make marks on a computer screen and add notes, doodles or whatever to your document. The software allows you to send treat these handwritten notes as documents, send them as e-mails, and file them in folders.

Support for Tablet PC (the OS, machines based on it are known as tablet PCs) came from on high, with Microsoft chairman Bill Gates waxing eloquent on the subject: “The launch of the Tablet PC marks an exciting new era of mobile computing that is limited only by the imagination of its users,” he said in a statement accompanying the launch. “The Tablet PC is a great example of how computers are adapting to how people really work, whether they’re taking notes in a meeting, collaborating wirelessly with colleagues or reading on screen. We’re just scratching the surface of what is possible.”

The idea of taking notes on a digital screen was not of course a new one, Microsoft itself had been working on the concept for a decade, and some vendors had already been producing variants on the theme, while Fujitsu Siemens is now in its nineteenth generation of “tablet PC-like” devices.

What Microsoft brought to the party of course was its above mentioned market-clout and some good ideas of its own. For one thing it didn’t try and re-invent the entire wheel and very sensibly based its OS on a full-scale version of XP. Windows XP Tablet PC Edition essentially allows you to do everything you can with XP, plus the additional tablet features, meaning XP-compatible applications can be easily run on it.

Enthusiasm for the launch of Tablet PC extended across to the Middle East, with a number of hardware vendors launching tablet PC models in the region. HP, Acer, Fujitsu Siemens, Toshiba and Viewsonic were among early companies to launch tablet PCs in to the Middle East market.

“This is an important evolution in the history of computing, as it delivers a level of freedom never before offered to PC users,” said Abdullatif Almulla, general manager of Microsoft South Gulf at the time of the launch. “We think that over the next two years, we will see hundreds of different types of users who will switch to the Tablet PC form factor, such as students, reporters, doctors and any type of mobile information workers.” Microsoft was predicting that up to 50% of the laptop market would be Tablet PC based by 2005.

||**||Bitter pill|~||~||~|However, coming up to a year later, sales have so far fallen short of expectations. “When we launched the tablet PC, our target was 1,000 units a month for it. Have we sold 1,000 units a month? The answer would have to be no,” says Christoph Schell, general manager personal systems group for HP Middle East. “We have not done that in either Q1 or Q2.”

This does not mean, Schell is quick to point out, that he sees the product as a flop for HP. “By offering the tablet PC as part of our line-up we have been able to make some very good sales, and it helps sell a lot of other product for us,” he explains. “When you come to the table with a tablet PC as part of your solution, then you can offer the customer a lot more than if you don’t have it. So am I disappointed that we haven’t sold more? No, because it has helped me increase sales and margin on other products. I really believe the tablet PC was a success for HP ME, we may not have made the numbers we expected, but I’m sure it helped us make the numbers we did on other products.”

However, across the entire EMEA region, sales have not been as impressive as vendors hoped. While it is generally accepted that new form factors, and new products in general, often take time to win broad acceptance, sales of tablet PCs have actually gone down, according to two influential analyst reports.

According to UK market research firm Canalys, sales of tablet PC devices in EMEA in Q2 2003 fell 23% on the preceding quarter, with less than 100,000 tablets having shipped in the region since November’s launch. These findings are backed up by market watcher IDC, which said the decline in sales from Q1 to Q2 was even more pronounced, with sales dropping 31% quarter on quarter.

As far as Canalys is concerned, the reasons for the lack of sales are clear: lack of support from Microsoft. “No one expected tablets to hit huge volumes overnight, but the shipments to date have fallen short of even the most conservative estimates and Microsoft needs to do something about it,” says Canalys director and senior analyst Chris Jones.

“For a leading-edge technology, vendors’ tablet refreshes are not keeping pace with what’s happening in the rest of the notebook market,” he adds. “While this is understandable, given the relative size of the segments and the 40% growth notebooks are currently enjoying, the PC industry, perhaps more than ever before, needs to innovate, be seen to innovate, and show commitment to those innovations, constantly improving them and delivering business benefits to customers, and it cannot do this without Microsoft’s help.”

||**||Could do better|~||~||~|Areas in which Microsoft could help, according to Canalys, are in subsidising the price of the Tablet PC OS, keeping it below that of the standard Windows XP for at least two years, establishing a dedicated EMEA Tablet PC marketing team and advertising fund, and work with vendors on developing their product portfolios, so they experiment with additional form factors.

“The first year was always going to be slow, but it is particularly disappointing that shipments have declined this quarter,” says Canalys analyst Rachel Lashford. “The fact that most vendors are only offering a single model and that Microsoft isn’t pushing the concept as hard as it could, coupled with the absence of key notebook vendors, such as Dell, IBM, and Sony, leaves potential buyers with doubts over the industry’s commitment to the format and these doubts will hurt sales,” she explains.

Microsoft has a very different take on the matter. “These reports are comparing Q1 and Q2 sales, but if you want to look accurately at the growth of the business then you need to look at year-on-year sales, there is definite seasonality in PC sales, and its usually Q3, Q4 where you see the business sales,” says Mazen Shehadeh, product marketing manager for Microsoft South Gulf. “Tablet PC isn’t a consumer buy, it’s a business device, and launches to corporates are always much slower than to consumers. Q4 is when you see IT managers trying to clear their budgets, so I think you need to wait a bit longer before you can get a clear idea of the market.”

Shehadeh says it is also not true that Microsoft is not supporting the development of the form factor: “We’re working with the OEMs all the time, we’re obviously working closely with them on issues such as performance, battery life and so on,” he says.
While Tablet PC can run just about any application that can run on regular XP, the benefits of the form factor can be exploited by specific applications, and these need time to develop, Shehadeh says. For instance, Microsoft has been working with a Dubai-based company to develop an application for a state-of-the-art car showroom, using a wireless LAN access point ‘hot spot’ that will enable salesmen equipped with tablet PCs, and belt-carried printers to provide a range of quotes to a customer on the spot, allowing them to demonstrate models and carry out paperwork. “That kind of application takes time to develop, its not overnight.” Shehadeh says.

HP is also working with software developers to bring out new applications for the tablet PC, and says it has done a deal with the region’s largest airline for an infrastructure system that includes tablet PCs, iPaqs and HP servers, and will help the airline manage its in-flight services better. The deal will see the airline equip each of its planes with four tablet PC units per plane, plus other HP kit. HP is also working on software for the healthcare sector that will allow mobile health workers to use tablet PCs bundled with mobile printers.

One area that Microsoft has been criticised locally for not developing enough for Tablet PC is Arabic recognition, something Shehadeh acknowledges hasn’t gone as well as the company hoped. “We have been working on something but it isn’t finalised yet, the problem is that Arabic is a very complex language with a lot of regional variations, and getting it right for every region is very difficult,” he says.

However, Shehadeh points out that this does not mean a tablet PC would be useless to an Arabic user. “Its true that we don’t have handwriting recognition yet, but there are plenty of ways around this,” he claims. “For instance, you can write in Arabic and save that text as an image and then you can send that image to your friends to view either in Internet Explorer or as a jpeg.”

“Microsoft has definitely committed itself to the Tablet PC OS, but there is still a lot of market awareness that needs to be done for the product,” says Krishna Murthy, general manager for Acer Middle East. “This is a unique product with a lot of features and benefits that need a lot of explaining to customers.”

As a company Acer has done very well with its tablet PC sales in the region, Murthy
says. “We’re seeing around eight to 10% of our total notebook sales being tablet PC now, so sales are going well,” he says. The vendor has just launched its second tablet PC in to the region, with a machine based on Intel’s mobile processor technology, Centrino. “We see a lot more sales with the Centrino model,” says Murthy. Acer is also looking at increasing its screen size, with the Centrino-based system sporting a 14-inch screen.

Acer isn’t the only company looking to Centrino for a boost to tablet PC sales. “Centrino is certainly going to make a lot of difference to the tablet PC, because it means you’re almost doubling the performance you can get out of them,” says Shehadeh. “With Centrino you can get much longer battery life, which is of course very important if you’re talking about a product that you’re carrying around for hours at a time.”

While HP went with Transmeta’s Crusoe mobile processor for its first-generation tablet PC, Schell says it will have a Centrino-based model in the Middle East by year end if not before. It will also offer a refresh on the Transmeta chip and is confident of beating competitors on performance.

||**||Slated|~||~||~|Tablet PCs come in two main formats, slate models, which is basically just a screen which the user can write on in the same way he would a normal, paper, notepad, and convertable format, which comes in the form of a standard laptop but allows you to rotate the screen and use it as a slate.

So far, slate models have proven more popular, according to IDC, which estimates that slate sales have accounted for just under 70% of all tablet PC sales in EMEA. The main reason for this is that slate models are usually cheaper, not needing all the functionality of a laptop and that they are designed for specific industry solutions, making them more appealing as vertical industry sells.

While the market was originally very divided in to the two camps, vendors are now looking to broaden their product portfolios and have a complete range of offerings.
For instance, Fujitsu Siemens, has just refreshed its Stylistic slate model, with the inclusion of a Pentium M processor, but it is also launching this month a second-generation convertible model, with the launch of the Lifebook 3010.

“Our positining is the convertible as the notebook for the corporate market and the slate as a product-based solution for the verticals,” says Susanne Lewitzki, product marketing manager , for Fujitsu-Siemens, Middle East and North Africa. “We already have a large customer base in vertical markets from our previous generations of tablet devices and of course there are already a number of applications supporting this.”

Like HP’s Schell, Lewitzki says that the tablet PC should be seen as only part of Fujitsu-Siemens product strategy. “Our big strategy is mobile computing, and we see the tablet PC as part of this, so yes, it is one of the alternatives that we offer to our customers,” she says. “We’re not trying to say that one mobile product should take the place of another, we leave it up to our customers what they want to buy. What we do see with the tablet is that it is the ideal product for people that need to enter a lot of data while moving around, but its a lot less intrusive in meetings than a traditional laptop.”

For sales of tablet PCs to really take off, its going to be this latter category that needs to buy in to it. Microsoft dubs them the “corridor warriors”, busy executives that want to move from meeting to meeting and then re-dock the system when they return to their desks.

So far, these users haven’t been willing to pay the price premium that tablet PCs demand to get the full benefits. But Microsoft is optimistic that sales will come. “You have to remember that sales to corporate customers are always much slower than to consumer customers,” says Microsoft’s Shehadeh. “For instance, when we launched XP itself two years ago then sales for the Home Edition took off much faster than for the Office Edition,” he says. “But we’re going to get there with Tablet PC, we’ve got too much committed to the product. People say we’re not supporting it, I say we’ve got 26,000 people working on our products.
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