PC makers face challenge from new players By Dick Satran
SAN FRANCISCO, April 14 (Reuters) - The personal computer,
now at the height of its market power and popularity, is about
to face some heady new competition.
Starting this year, new Internet-connected machines will be
hitting the market in a wave, marking the first serious
challenge to the mighty desktop computer's dominance.
Even the laptop won't be safe as computing leaps onto
so-called Internet appliances: handsets, sophisticated mobile
phones and television screens, pushed by smaller, more powerful
computer chips and the growth of the Internet.
"The development and adoption of Internet appliances will
explode during the next 12 months," investment bank Hambrecht &
Quist said in a new report released last Friday.
Few in the high-tech industry will dispute that such
devices are about to make a big splash -- the only debate is
whether the personal computer will remain useful as the mother
ship for the new devices or simply get lost in space.
"The PC era is over," IBM Chief Executive Louis Gerstner
recently declared in a letter to shareholders, in a clear sign
that the world's biggest computer maker sees a serious
challenge to the existing order.
But Hambrecht & Quist analyst Danny Rimer said, "Contrary
to popular belief, Internet appliances will not replace PCs,
but in many cases will provide different services than PCs."
Gerstner, too, says don't expect PCs "to die off, any more
than mainframes vanished when the IBM PC debuted in 1981."
Still, mainframes never held the same status after the PC
took over and much of computing shifted to stand-alone
desktops. Now, the reverse may happen. International Data
Corp., sees purpose-built appliances surpassing PCs as the main
way to connect to the Internet and ballooning to a $90 billion
market within three years.
The Internet's wide adoption is fueling momentum for almost
any new developments in high-tech. "The Internet is as
important to our future as silicon was to our past," said Intel
Corp. Executive Vice President Paul Otellini, whose company has
made more money from silicon chips than anyone.
With businesses gearing up for $1 trillion in e-commerce,
companies are increasingly aiming investments at the network,
not the desktop. In homes, where e-mail and the Internet are
the killer applications, consumers are also looking for more
and better ways to connect -- slow-to-boot-up, complicated
personal computers might not cut it.
"What will happen over the next few years is that we will
Web-enable everything," IBM Internet division general manager
Dr. Irving Wladawsky-Berger said in an interview.
Set-top boxes will link televisions to the Internet,
PalmPilot-type handheld computers will be sold with wireless
modems to receive e-mail and mobile telephones will have
Internet browsers embedded.
Gameboys and handheld electronic toys are being launched as
Internet-ready devices. Home-based wireless networks, with
backing of companies like Intel, also are becoming a reality.
"Putting an Internet connection inside a personal
electronic device will be as simple as making televisions
'cable ready,'" IBM's Wladawsky-Berger said.
As a result, for the personal computer industry, the number
of possible competitors grows by the day. Japanese companies
like Matsushita Corp. and Sony Corp., the leaders in consumer
electronics, see the appliance market as way to get back onto
the cutting edge of technology, after slipping in the PC era.
In the fiercely competitive communications market, telecom
companies may start offering inexpensive computing devices to
consumers as a way to sell them subscription services.
AT&T Corp. acquired a majority of cable modem company
AtHome Corp., mostly for its PC-based service. But AtHome is
also working on a related service to convert televisions for
Internet service. Microsoft Corp. made a similar move by
acquiring WebTV, a service that links televisions to the
Internet. It is also pushing Windows CE, a pared-down operating
system aimed at keeping its systems relevant when PC's are not,
and a "light" browser for mobile Internet appliances.
But in a sense, the best placed to win in the
communications era are those without any history in the PC
business at all. Communication device makers, with less baggage
to carry, could travel fastest in the post-PC era.
"Phones are getting more and more powerful, and they are
connected direct to the network so they have a capability
that's been lacking in laptops, said Dr. Irwin Jacobs, chairman
of Qualcomm Inc., one of the leaders in sophisticated cellphone technology.
The opportunities for mobile phone makers to grow on the
Internet inspired Qualcomm to end a long dispute with European
phone makers, led by Sweden's Ericsson, and create a single
technology for wireless phones.
That pact brightens the future for the telephone makers,
and, with 400 million units already out in the field, their
highly global base of users tops even the PC industry.
"PCs have kind of reached a plateau, in their level of
sophistication," said Greg Blatnik of Zona Research, but mobile
phones are just taking off. New models will have high-speed
Internet connections that will be able to carry two-way color
video, text and voice, from almost anywhere.
The only thing missing is a full-sized keyboard, though
Qualcomm's Jacobs notes digital phone systems are already
providing a base for voice recognition technology. "So over
time, people will replace desktops with more and more powerfulphones."
Silicon Valley entrepreneurs are not standing by watching,
of course. Venture capitalists are pouring tens of millions of
dollars into start-ups that are creating new products, and most
major PC makers have communications devices under development.
One company, MediaQ, has launched a business in making
chips for PC makers to build Internet appliances. Sunder
Velamuri, MediaQ vice president of marketing, sees PC makers
shifting gears and become big players. "We think there is a
huge market for them in the post-PC devices."
In one of the most watched device market start-ups, the
creators of the PalmPilot handheld computer bolted 3Com Corp.,
and began a start-up for handheld Internet devices.
The company will not disclose its plans, but says it will
have a major product by year's end. Handspring business
development director Ed Colligan says start-ups like his will
play a major role in the development of the market.
"If you look at the history of computing, whenever there is
a paradigm shift, the companies that led the previous wave
don't make the transition very well," he said. "Nobody owns thefuture here." |
