Captain: Here's another column on COMDEX next week and small non-legacy machines like iPAQ. The author thinks they are a big thing. Scroll down for highlighted passages.
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This Year's Comdex Focus: Smaller, Cheaper, Easier-to-Use PCs
By Jim Seymour
14/11/99
This week's fall Comdex, the biggest and in many ways the least interesting of the major personal-computer industry trade shows, opens for its 20th run in Las Vegas. I confess that I have slogged through no fewer than 18 of these over the past two decades, missing only the first one.
Can you hear my heart go pitter-pat?
For a few years, Comdex (the COMputer Dealers EXposition) fulfilled its original purpose: giving the proprietors of mom 'n' pop computer stores a place to go once a year to see and order the new products they'd be stocking and selling over the next year. But those days are long gone, as are the mom 'n' pop shops themselves, victims of megachains (think CompUSA (CPU:NYSE)) and direct marketing (think Dell (DELL:Nasdaq)) and product cycles now measured, in some cases, in weeks, let alone months or quarters.
But 200,000-plus "computer people" still trek to Las Vegas for the gaudy booths, see-and-be-seen crowds, industry awards shows and ugly giveaway T-shirts -- in the process, annually renewing their rep among Vegas cabbies and waitpeople as the world's worst tippers.
If Comdex is fundamentally obsolete by its original intentions, computer-industry companies still flock every year to Las Vegas for the fall version -- there are many other Comdexes, all smaller and none important, throughout the year -- in many cases because they fear that not showing up will start rumors that they're in trouble.
Though Comdex may still be a good place for the hardy and determined to spot new products, it's even better as a giant swap meet for industry gossip. As an investor and tech guru of sorts, I find far more value in what I can learn in companies' private demo suites in the glitzier Vegas hotels and at the incessant nighttime parties than on the show floor.
Every Comdex seems to have a theme: an early glimpse at an emerging trend that promises to reshape the computer industry. (Of course, in best computer-business fashion, the largest companies just can't wait for the show to announce and maybe even actually show their newest products, and so they fill the week before Comdex with press conferences and new product rollouts.)
>This year, the broad theme emerging is the wave of new, cheaper, ostensibly easier-to-use, "nonlegacy" PCs coming to market. By nonlegacy, computer people mean products that don't have all the features, connections and devices of previous generations of similar products and which may not, in some cases, support all the software that runs on those earlier iterations.
This year's new smaller and cheaper nonlegacy PCs are still "Wintel" machines: They run Microsoft (MSFT:Nasdaq) Windows on Intel (INTC:Nasdaq) x86-series processors, such as the Pentium II and Pentium III, rather than, say Linux-based boxes using obscure processors from minor players.
They have to be Wintel boxes or no one would buy them.
One big twist this year is that these new, slimmed-down boxes are not intended for consumers, but for the office.
By stripping out such components as 3.5-inch floppy disk drives (an anachronism in an age when so many files are stored on servers and exchanged via email or other network transfers) and maybe some internal ISA and even PCI expansion slots and probably external serial ports, manufacturers can produce substantially smaller and cheaper systems, without, the argument goes, sacrificing any of the functionality we've grown used to in our desktop and notebook PCs.
This has serious implications for investors in the PC makers.
Many of these new systems, such as the e-PC just shown by Hewlett-Packard (HWP:NYSE), or the iPaq (wonder where they got that name?!?) rolled out by Compaq (CPQ:NYSE) on Wednesday, or the compact, attractive WebPC Dell Chairman Michael Dell previewed at a private event for big corporate customers a month ago, approach or even achieve the "closed-box" design PC makers have been creeping up on for the last couple of years.
By eliminating those internal expansion slots, and also internal bays for adding an additional hard disk, CD-ROM or DVD-ROM drive, or Zip drive, and maybe extra space on the system's motherboard for more memory, manufacturers can produce a powerful, economical closed-box design. The package comes without the substantial support costs of your calls and mine when we open the case to install something -- then spend two expensive hours on the phone with the PC maker's tech support, trying to figure out what went wrong.
Corporate buyers like the idea of these closed-box PCs, too. Corporate IT departments either order PCs in a given configuration or (increasingly rarely) maintain a shop in which they set up their preferred configuration themselves, then send the locked-up PCs out to their ultimate users. For many reasons, these IT departments are very serious about not altering that corporate-standard configuration ... and they especially don't want workers opening the box to add a hardware component on their own.
So closed-box nonlegacy PCs are likely to find eager buyers in corporate America.
Many of these new machines -- Dell's WebPC and Compaq's iPaq, especially -- are also remarkably attractive. Combine them with an LCD display and a compact keyboard, and you've got a sleek, powerful system that takes up a lot less desktop real estate than a traditional beige-box desktop PC.
But the real if rarely discussed advantages of these new machines aren't for the buyer or the user, but for the manufacturer. PC makers have been worried that although the typical "in-use product life cycle" -- the rate at which companies replace their PCs -- has been holding at a very acceptable 18 months or so, desktop-PC life cycles have been stretching out, to three years or more in most companies today.
With a largely saturated business-PC market, the boxmakers are desperately eager to shorten the cycle, and encourage companies to replace those systems more often.
Presto: the closed-box nonlegacy PC.
Experts are predicting the average in-use life of these new compact PCs will be about two years. Cutting a full year out of the time its best and biggest customers keep their PCs makes a huge difference in the bottom line for a Dell or Compaq. With margins battered by falling system prices, the boxmakers are looking everywhere for ways to keep up their quarter-to-quarter growth.
So nonlegacy boxes that buyers will likely replace a year sooner sound like manna from heaven for these companies.
I've worked with three of these new closed-box machines, and liked all three a lot. They aren't really nonexpandable, of course; you just have to add new devices externally, typically through network or USB (Universal Serial Bus) connections. After a dearth of USB devices during that standard's first couple of years, we now see everything from scanners to printers, digital cameras to external drives, available in USB form. I haven't missed the older designs a bit.
Using external devices runs the cost up a bit, since these devices must have their own cases, power supplies, USB cables, etc., but also offers advantages in terms of system flexibility. (You might think the greater use of external sub-systems, driven by this move toward closed or nearly closed PCs, would create business opportunities, and thus investment opportunities, for the makers of cases, power supplies and so on. Yes on the business opportunity, but nix, probably, on the investment side, since most of the suppliers of these components lurk in the insanely price-competitive Taiwan netherworld of tiny component makers.)
But for the companies building and selling the systems themselves, this evolution will be an important driver in increased profitability and, eventually, volume.
With continuing pressure on earnings (such as Dell's 18-cent quarter, reported Thursday), and recent downgrades of the major boxmakers by many analysts, these cheaper-to-build, shorter-lived PCs are going to be a big deal, indeed, for PC makers.
And thus a big deal -- the biggest deal -- this week in Las Vegas.
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