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To: PartyTime who wrote (10508)	2/1/2000 1:01:00 PM
From: Pamela Murray	Respond to of 18366

Pocket PC won't change much in handheld race By Lisa R. Goldbaum NEW YORK. 3:35 PM EST-Will Windows CE ever be a viable competitor to 3Com's Palm? As Microsoft (nasdaq: MSFT) prepares to release the next incarnation of the operating system in the spring, heretofore code-named Rapier and now called Pocket PC, that's the biggest question of the hour. Especially for hardware manufacturers like Compaq Computer (nyse: CPQ), Casio and Hewlett-Packard (nyse: HWP), which continue to support CE when others like Philips and Everex have bailed out because sales failed to meet expectations. Pocket PC is said to address some of the key complaints about Windows CE. One of the biggest has been about the complexity of the OS relative to the Palm. Microsoft is said to be tinkering with the interface to make it more intuitive and to provide easier accessibility to features with fewer taps of the stylus. Another problem with the operating system has been its size, which is bigger than Palm and requires hardware manufacturers to add more memory to accommodate it, making CE devices more expensive than Palms. The new version of CE, according to people familiar with the OS, will be faster and leaner than its predecessors. It will also be the first to boast Microsoft's new ClearType technology, which makes text clearer and easier to read--a particular advantage on a small palm-sized screen. It's also expected to have wireless connectivity and better integration with desktop applications. Despite these improvements--and all of Bill Gates' attempts Jan. 5 to hype the OS during his speech at the Consumer Electronics Show in Las Vegas--Microsoft isn't likely to gain much ground on its nemesis Palm and may only succeed in stopping the bleeding for awhile. Jack Gold, an analyst at the Meta Group, said that the best Microsoft can probably hope for with the new release is that it maintains its approximate 10% to 15% market share. "They were losing market share like crazy, and [Pocket PC] could help hold them in place," he said. 3Com (nasdaq: COMS) grabbed an early lead in this space with its Palm Pilot devices because they were cheap, small and very easy to use. While Microsoft thought it could gain some ground for CE by supporting color--a feature that makes a small screen more bearable and which Palm has yet to match--the color devices tended to be bigger and more expensive, and most users didn't seem willing to make those sacrifices. But Microsoft and CE device manufacturers have tried to become more Palm-like, and the Compaq Aero 1530, for example, is very similar in both size and weight to the Palm V. In that vein, Microsoft seems to be making adjustments to the OS that will facilitate greater portability and ease of use. But many are still skeptical that the company can succeed. For one thing, some developers think the OS is still too bulky for a handheld device, and that many of Microsoft's changes to the interface in an effort to make the OS less complex are largely cosmetic and don't result in easier access to applications. Of course, Microsoft isn't only looking at the handheld market when it comes to CE. In fact, while the heart of the operating system remains in tact, Microsoft has segmented CE into various forms for different types of devices, like smart phones, where the company competes head to head with the formidable Symbian alliance of top handset manufacturers, which uses Psion's EPOC operating system. Microsoft also hopes CE will become a force in devices like Web appliances and embedded systems, though the competition is fierce in these areas. On Jan. 5, chip giant Intel (nasdaq: INTC) announced it will sell Web appliances based on the Linux operating system. That's bad news for Microsoft, since it underscores just how attractive Linux is for single-function devices that only require a simple OS. For starters, Linux is free, so device manufacturers don't have to factor the OS into the cost of their systems, which by nature are not very elastic in price. Moreover, since Linux is open source, the manufacturer can tailor it to specific needs. "If you're going to try to build a Web appliance that's going to sell for $99 and you have to pay $5 to Microsoft for CE, why would you do that when you can get Linux for free and cut wherever you want," Gold noted. "For low-end devices, you don't need a lot of drivers and connectivity." But one area that requires this type of advanced functionality and where CE could shine in the near future is the corporate market. Analysts expect that businesses will start to outline policies for handhelds this year that will make these devices more of a staple in the business world, much in the way laptop computers became prevalent in the corporate space during the past decade. "The [handheld] market today is not being driven by corporations, but by individuals," Gold said. "But that will change over the next two years as the majority of companies out there will put in place some kind of standard policy on who gets one, how it connects up, which platform it runs on and how it is supported." Business travelers often require sophisticated connectivity features to retrieve e-mail and news, as well as access to applications used on their office computers. Not to mention the fact that many businesses already using Windows in their client-server environment may look to standardize on one platform, which would make CE the more attractive option. But if Gates' goal with Pocket PC is to eat Palm's lunch, he better get used to going hungry.