PC Slump Spurs ‘Mobility’ Push; Microsoft Spells Relief ‘X-P’ – Brief Article

Todd Wasserman

The current popularity of PCs was evidenced by the name-change for PC Expo. Like the trade pub eWeek (nee PCWeek) and the data firm NPD Intelect (formerly PC Data),trade show owner CMP Media sought to distance itself from the words “personal computer.” The new name, TechXNY, may not roll off the tongue, but at least it’s PC-free.

With desktop sales set to fall this year after a 16-year rise, an interminable price war and a lack of innovation, it’s pretty to easy to see why PCs don’t have the cachet of years past. Compaq, for instance, has been downplaying its PC line for years. Early last week, Compaq announced a restructuring that emphasizes services, not software.

For some, Compaq has a credibility problem. “The goal is noble. It’s just that they haven’t shown any degree of competence in integrating their various parts,” said Rob Enderle, an analyst with Giga Information Group, Santa Clara, Calif.

HP and Compaq have spent tens of millions in their respective “Invent” and “Inspiration Technology” campaigns, which position the companies as engineering-driven consulting firms. By all appearances, the companies plan to stick with the efforts, even though there hasn’t been any tangible proof of an uplift; both stock prices are off more than 50% from their 12-month highs.

Meanwhile, Compaq and HP have to contend with a bruising PC price war, started by Dell this spring. Achim Kuttler, dir-PC clients business for HP, is not worried. HP has the deep pockets to wait out a price war, and so does IBM, he said. He declined comment on Compaq.

Relief may come from Windows XP, the next version of Microsoft’s operating system. Last week, Microsoft announced that it and Intel will spend a combined $400 million on the October launch, while third-party PC companies, presumably including HP and Compaq, will spend another $600 million. All this despite Microsoft’s plan to put $500 million behind marketing its Xbox gaming console.

While optimism for XP is strong, the exuberance around handhelds would give Alan Greenspan the willies.

Palm and Handspring watched their stock prices shoot up about 20% each after Palm’s $89 million loss in the latest quarter was somewhat less than analysts had predicted. Compaq, meanwhile, is projecting that by 2005 revenue from its iPaq handhelds could eclipse that of its PCs.As a result, while it was hard to spot a PC on the floor, everyone seemed to be showing “mobility solutions.”

Compaq’s recent success shows that after a few false starts, Microsoft’s handheld OS, the Pocket PC, is bearing fruit. Microsoft now claims 16.5% of U.S. handheld sales, in units, compared to a single-digit share last year. In early June, Microsoft invited licensees Compaq, HP and Casio to its Redmond, Wash., headquarters to air concerns.

According to Mary Starman, product manager for Microsoft’s mobility group, the three decided to have more of Microsoft’s co-op spending funneled into advertising, rather than to retail end caps and the like.

Meanwhile, Microsoft is planning to announce new licensees in coming weeks. Given Compaq’s success, entries by Dell and Gateway would seem likely.

Microsoft’s recent Pocket PC ads, via McCann-Erickson, San Francisco, have focused on healthcare and sales. The corporate push is a departure from consumer-focused ads under the banner “Can your palm do this?” that launched in 2000. The reason? Starman said the company is not really interested in the consumer market, but instead wants to leverage corporate users of products like its Microsoft Exchange e-mail application. “There are 75 million Exchange users to tap into,” she said.

Palm is also pushing into the corporate market. New print ads, breaking later this summer, will show an inspector from Volvo on a dock examining an about-to-be-shipped car, Palm in hand. Another will show the Palm being used in a health care application. AKQA, San Francisco, handles.

Palm’s latest round of ads, currently hitting, showcase the SD Card, a chewing-gum size memory storage device. Since Panasonic (and about 200 others) backs the SD Card and Sony a Palm licensee, backs the competing Memory Stick, it might strain relations with Sony but such conflicts happen all the time in tech.

Satjiv Chahil, Palm’s CMO, meanwhile, is unfazed by Microsoft’s criticism that the Palm OS won’t cut it with Corporate America. “One of Palm’s strongest selling points is that it brings personal and professional life together,” he said.

Handspring, the highest-profile licensee of the Palm OS, is also making overtures to the corporate market, but Karen Siprell, vp-corporate marketing, said the consumer market remains the focus. This fall, Handspring is planning to target professional women and college students. A refresh of the current campaign, via Leo Burnett, Chicago, is due in October.

Palm came from nowhere in 1996 to become the hip gadget thanks to some smart product placement. Palm, which is currently on display in the film The Anniversary Party, will continue the program with placement in Final Fantasy due next month.

Handspring will be seen in Murder in Small Town X, a Fox series set to bow in July Handspring is one of four major placements, including Taco Bell, Nokia and Jeep.

But such placements are a crapshoot. Chahil recalled how the Cameron Diaz character in last falls Charlie’s Angels referred to a Pocket PC product as a “Palm,” to the probable chagrin of Microsoft execs.

COPYRIGHT 2001 BPI Communications, Inc.

COPYRIGHT 2001 Gale Group

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