Little PC a big step

At a trade show last April in Seattle, Bill Gates was trying to persuade computer makers to build a new kind of handheld PC, a device that could change the way people communicate while generating $50 billion in sales by 2008.

Yet all he had to show for it was a block of wood, carved and painted to look like the "Ultra-Mobile PC" Microsoft envisioned.

"They said to me when they were briefing me, 'Hey, this is better than what anybody else has,' " Gates joked in an interview after his speech. "I said, 'You mean nobody else can shave their block of wood smaller than we can?' "

Computer companies took the bait. This week Microsoft and Intel are announcing that the first generation of UMPCs will go on sale later this year. They're expected to cost between $500 to $800. Microsoft expects 100 million will be sold by 2008. The device was developed under the code name Origami.

The numbers are enticing, but the industry has tried since the early 1980s to develop a handheld computer for the mass market.

In this new effort, Microsoft and its partners are introducing machines initially about the size of a Lean Cuisine frozen dinner. They'll have screens from 5 to 8 inches across and controlled, in part, by a stylus. Later models may have touch-screen controls and come with or without keyboards, in different shapes and sizes.

With PC sales slowing, Microsoft and Intel hope they have the next must-have digital accessory. In the always-connected broadband world, the devices could be a new way for people to stay plugged in without having to lug around a laptop, cellphone and iPod.

Manufacturers and analysts say the key is to make the devices cheap, simple and nifty.

"We will, eventually, like we have cellphones today, have a device like this," said Rob Enderle, a Santa Clara, Calif., consultant and industry analyst. "I think in the ideal case this might become a replacement for your cellphone at some future date."

Various outlooks

While Gates was showing his mock-up in Seattle, Finnish phone maker Nokia was building a similar device with off-the-shelf parts. Nokia beat the PC titans to the punch and released the 770 Internet Tablet last fall. The device runs on the freely shared Linux operating system, connects to the Internet via Wi-Fi networks and costs $359 — hundreds less than the devices that Microsoft and Intel are unveiling this week.

Nokia doesn't want to displace the PC or the cellphone — it wants to fill a gap between those devices.

"We see that it should be something that is really concentrating on messaging, communications, Internet access — it's not your word processor or your spreadsheet," said Ari Jaaksi, Nokia's director of open-source software operations.

Jaaksi didn't provide sales figures or forecasts, but said Nokia has had to boost production to meet demand. It's selling the devices directly, through computer retailers and through European Internet service providers.

Jaaksi characterized the 770 as a mobile browser. He carries one instead of a laptop on short business trips, and he loads one with movies for his kids to watch while traveling.

Remote controls

Enthusiasts in the U.S. are programming 770s as remote controls for digital media stored on their PCs, and Nokia's encouraging software developers to create new applications. It's also preparing to release software for making Internet phone calls with the 770.

Nokia knows there's a huge opportunity for people to stay connected, Jaaksi said.

"If you think about that there are 600 million households with broadband connectivity, and over half of the new broadband customers opt for Wi-Fi, more and more people are living in this Wi-Fi bubble," he said. "There's clearly a market opportunity to offer experiences and devices within that bubble."

Jaaksi said there were many skeptics within Nokia because so many other companies have tried and failed to sell handheld computing devices.

One factor is price, but another is that the devices have to be simple to use while seamlessly connecting to the Internet, he said.

With the 770, Nokia splurged on a sharp color screen but kept costs down by using phone parts, a regular phone battery and a standard charger.

Just as Microsoft used a teasing Web page to drum up interest in its announcement this week, Nokia tried a clever trick to pique the interest of early technology adopters.

The company had a contest for software developers, offering to sell 500 of the devices for $99 apiece to the ones who submitted the best reasons for getting the device. Nokia then gave the proceeds to the Gnome Foundation, which develops middleware used in the device.

Enthusiastic audience

Earlier handhelds found enthusiastic audiences among the software crowd, but few became broadly successful. Predecessors range from the British Psion handheld organizers released in 1984 to Apple Computer's Newton in 1993 and the OQO miniature PC introduced in 2002.

Options today include smart phones with keyboards that run productivity software, wireless personal digital assistants and miniature laptops sold in Japan.

Microsoft made several attempts since Windows XP was released in 2001. One was a wireless auxiliary display that could be carried around the home to control a PC, but quality problems delayed its launch. When it finally reached the market it cost as much as a wireless laptop.

The company also developed a Tablet PC version of XP that recognizes handwriting, and helped PC makers develop a category of slatelike computers in 2002.

Enderle predicts the Ultra-Mobile PC will be more successful and become a mainstream product by 2010 — if consumers aren't turned off by the first attempts Microsoft is presenting this week.

"That's really the task Microsoft has in front of it ... to make the initial device compelling enough [that] the niche market will use it, that early adopters will use it, so the broader market, once the device is ready, will be lusting for it."

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com