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`The Great Digital Hope' Could Be A Heartbreaker


Information Processing

`THE GREAT DIGITAL HOPE' COULD BE A HEARTBREAKER

Last January, Apple Computer Inc. Chairman John Sculley painted a vivid word picture of a new kind of consumer product. Before an audience of gadget makers from around the world at the Winter Consumer Electronics Show, he described a handheld device he dubbed a "personal-digital assistant"--part electronic organizer, part computer, part communicator that would, he said, merge consumer electronics, computers, and telecommunications. For personal-computer makers, whose main business was cooling off, the vision of this hot new market was a sight for sore eyes.

Fast-forward 10 months, though, and the picture begins to blur. Since previewing Newton, a prototype of the first Apple personal-digital assistant, or PDA, in May, Sculley has backpedaled. Rather than setting off a mass-market bonanza, Newton sales are expected to build slowly, starting with corporations willing to pay $1,000 for a productivity tool, rather than with consumers, who will likely hold out for cheaper gadgets. And, Apple acknowledges, production has slipped a few months from the original "early 1993" rollout date.

Apple's shift leaves all the other computer companies that have been hatching PDA plans--from IBM to AT&T to Tandy--in an awkward position. Because Apple defined the concept so clearly with Newton and set expectations so high, the others now are selling against a product that exists only in Apple's lab but manages to dominate the market. Newton is like Big Foot, jokes Bruce L. Claflin, general manager of mobile computing at IBM Personal Computer Co.: "Many people talk about it but sightings are rare. It was overhyped and created expectations from which not only that company, but every other company, has to step back."

By now, it's clear that it won't be until 1995, at the earliest, that a real market for PDAs emerges. Part of the problem is doing all the things that a PDA is supposed to do in a handheld package that will sell in the $500 range. Research shows that "the price tag has got to be under $500, and preferably closer to $300," to create a broad consumer market, says Robert J. Frankenberg, a Hewlett-Packard Co. vice-president.

As outlined by Apple, a PDA will be a personal organizer, scheduler, paperless-fax machine, and data terminal--capable of tracking your appointments, retrieving electronic mail, airline schedules, stock prices, or the figures stashed in your PC back at work. And all this is supposed to be as easy as using pen and paper. Instead of keyboards, many PDA designs use stylus and electronic pad. To find information, you tap on the screen. Scribble a note, and have it faxed.

`GOOD HEADLINES.' "PDAs have become the great digital hope," says analyst Raymond Boggs of market researcher BIS Strategic Decisions. "But they just can't live up to that." Indeed, the gestating PDA market already is being compared with the pentop PC business, which has fallen far short of initial expectations. In 1990, experts were predicting that sales of these new portable computers, which can "read" hand printing, would hit $800 million in 1992 and pass conventional PCs by the year 2000. Mainly because handwriting-recognition software still is error-prone, sales this year will hit only about $100 million.

Now the joke among Silicon Valley wags is that PDA stands for "probably disappointed again." Recently, analysts have reset their sights, saying PDAs will inch into the market next year with sales of only $28 million, according to BIS Strategic. That's a far cry from the $125 million in revenues that one Apple bull on Wall Street predicted for Newton alone. "At this point, PDAs are good headlines but little else," says Eckhard Pfeiffer, president of Compaq Computer Corp.

Even if PDAs aren't the PC industry's magic bullet, nobody's giving up on the concept. Publicly, Compaq is dismissive, but back in the labs, engineers are working on a PDA design to be ready when the market gels. Meanwhile, PDA pioneers were evident at Comdex, the industry's annual hypefest in Las Vegas, held the week of Nov. 16. EO Inc., a Silicon Valley startup that's working with Matsushita Electric Industrial and Marubeni, showed off its PDAs at the booth of AT&T, another partner.

In its booth, IBM showed a prototype of a possible PDA that resembles a thick cellular phone with an LCD screen. Essentially, it's a PC clone with personal-organizer software as well as built-in fax and electronic mail capabilities. IBM's Claflin says Big Blue will have a number of PDA-class products next year. One signal: IBM President Jack D. Kuehler is slated to make the keynote speech at the January Consumer Electronics Show.

ALL HOOKED UP. Meanwhile, both IBM and startup EO are trying, to the extent they can, to redefine the PDA concept Sculley outlined last January. EO machines share Newton's pen-and-electronic-pad format and include handwriting software but are described as "personal communicators," a term that IBM also prefers. The 2.2-pound 440 model packs fax, e-mail, cellular phone, and PC capabilities into a tablet-like device clearly not for consumers. List prices start at $1,999 and run to $3,299 for the 4-pound 880.

EO maintains that initial PDA customers will be the same ones who first used cellular phones: sales representatives, entrepreneurs, and executives on the road. That's why EO is testing its machines with NBC TV stations, Aetna Insurance, and Levi Strauss before full production begins in the second quarter of 1993. Says EO President Alain Rossmann of the likely PDA buyers: "These people place a very high value on staying in touch."

Tandy Corp.'s twist on the PDA is what it calls "personal-information processors"--a pumped-up version of today's electronic organizers. One hint of how Tandy might go is seen in the newest version of Sharp Electronics Corp.'s Wizard personal organizer. The latest version, the $649 OZ-9600, has the scheduler, address lists, and rudimentary word processing of the earlier Wizards, but also features a touch-sensitive screen and a graphical interface for finding information. It can also capture an electronic snapshot of whatever is drawn on the screen with a stylus. Paul Allan, vice-president of the Sharp Wizard Div., says the next Wizard will read handwriting. His view is that computer makers are trying to redefine the market that personal organizers already developed, but they're "approaching this whole thing from the dark side of the moon." Says Allan: "No one knows what they're doing, or who's going to buy it."

Like Sharp, Franklin Electronic Publishers Inc. views PDAs from its established position in consumer electronics. The maker of spell-checkers and other handheld electronic reference works sees PDAs as "mobile information tools." Its $199 Digital Book System crams an entire dictionary into a 4.6-ounce package. Franklin says plug-in data-base cards could turn the book into a tool for route drivers and traveling workers.

Over at Hewlett-Packard, Sculley's portrait of a PDA has caused some confusion. Since 1991, HP has been selling a handheld PC called the 95LX, which it calls a "personal-information appliance." Now in its second generation, the 95LX includes a Lotus 1-2-3 spreadsheet, personal organizer programming, and, as an option, wireless data communications. But sales dropped off 15% to 20% in February, just after Sculley's Consumer Electronics Show speech, and didn't pick up again until June when buyers began to see that Newton was still months away. "They created all this hype," says Frankenberg. "They put up the bar . . . in the marketplace and then just kind of blithely discovered there's no consumer market at $900."

Competitors continue to bristle at the power of Sculley's vision. "We're certainly not trying to alienate the industry," says Apple Vice-President Lawrence G. Tesler. He says now that Apple never expected this would be a mass product out of the chute--that the market somehow got the wrong message. Sighs Howard Elias, senior vice-president of Tandy: "In other industries, everybody knows what the market is and is singing out of the same hymnbook. In this industry, we get ahead of ourselves." And ahead of reality, too.Kathy Rebello in Las Vegas with Catherine Arnst in New York


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