Microsoft Will Challenge Palm's
Hand-Held Computer Dominance
By STEVE LOHR
ith impressive new software for handheld computers, Microsoft
on Wednesday will mount what industry analysts regard as its
first serious challenge to Palm Inc., the leader in the fast-growing market
for pocket-sized machines.
Microsoft's new version of its Pocket PC software can play music in the
popular MP3 audio format, display electronic books in the first major
introduction of the company's Cleartype software and play video clips.
Compared with earlier versions of its software, it also has an
easier-to-use interface for retrieving personal contacts, schedules and
to-do lists -- the basic functions of the small electronic organizers, a
category pioneered by Palm.
The software also includes a Web browser.
In the past, Microsoft's Pocket PC software, first introduced two years
ago, has been criticized as cumbersome and hard to use. And the devices
made by outside suppliers to run the software have been big and clunky
compared with the Palm machines. But in addition to the new software,
computer makers including Hewlett-Packard, Casio and Compaq are
announcing streamlined new handheld machines that run the Pocket PC
programs.
"This represents a significant challenge to Palm," said Michael
Gartenberg, an analyst for the Gartner Group, a research firm. Because
of the improvements, Gartner is for the first time telling its corporate
clients that Pocket PC machines are an acceptable alternative to Palm.
Microsoft's strategic bet is that the handheld market will move toward
full-featured machines -- more like personal computers and less like
electronic organizers.
"Palm talks a lot about simplicity, but we think you can have simplicity
without compromise," said Ben Waldman, vice president of Microsoft's
mobile devices division. "Our research shows that people want to do a
wide variety of things with these machines."
Microsoft, analysts say, is going after the premium end of the handheld
market. The Pocket PC machines have color screens and will sell for
about $500. The comparable Palm machine, they say, is the Palm III C,
which sells for $450.
"The new Pocket PC machines are
impressive, but the issue is whether
that is what people really want,"
remarked Andrew Seybold, editor in
chief of The Outlook on
Communications and Computing, a
newsletter. "Do they want a desktop
PC in their pocket or do they want an
organizer? The jury is still out on
that."
This is the third version of Microsoft's Pocket PC software, which uses
Windows CE, a stripped-down variant of its PC operating system
software. A computer industry adage is that Microsoft does not really
make a successful product until version 3. Its Windows operating system
was not a big success until the third version was introduced in 1990 and,
similarly, its Internet Explorer browsing software was lackluster until the
third version.
Still, Microsoft faces an uphill struggle in trying to catch Palm. Last year,
according to the International Data Corp., Palm machines accounted for
nearly 85 percent of the market compared with 10 percent for handheld
machines running the Microsoft software.
Palm is the industry standard and it enjoys the self-reinforcing advantages
of leadership, even if Microsoft comes up with somewhat superior
software. Some 50,000 third-party programmers now write applications
to run on Palm's operating system, Palm OS, far more than the number of
developers for Microsoft's handheld technology.
The company's predicament reminds some of the problems the Apple
Macintosh faces in trying to compete against Microsoft Windows.
"If Microsoft had introduced this software four years ago, it could be
dominant today," said David Pogue, author of "Palm Pilot: The Ultimate
Guide." "But now it faces an almost hopeless job of catchup. Microsoft is
finally going to find out what it's like to be Apple."
But Diana Hwang, an International Data analyst, says Microsoft appears
positioned to make steady headway against Palm. By 2003, she
estimates that handheld machines using Microsoft technology will account
for 40 percent of the market compared with 58 percent for those running
Palm software. The Palm estimate includes sales by Handspring, whose
Visor machines, introduced last fall, also use the Palm OS. |
