The impending launch of Asus' Eee PC has the industry waiting to see whether the product can carve out a new market category. The compact machine, which was initially aimed at the education market and only available via tender, is now being opened up to the wider channel and retail markets. It will retail for $499 and is available locally from next month.

The Eee PC features a 7-inch screen and weighs less than a kilo. It includes a built-in Web cam, Wi-Fi, Skype and MSN connectivity and is based on solid-state (flash) memory. Other specs include 3.5 hours of battery life and a Linux-based operating system. As well as selling Eee PC through its existing distribution channel, Asus country manager, Ted Chen, said it was considering working with retailers.

Education is the obvious target market but Chen said the vendor was providing several hundred thousand Eee PCs to an insurance company and had already taken 10,000 pre-orders locally.

Chen insisted the Eee PC was not just a replacement laptop but a connectivity gadget. "We don't want to focus on the hardware specs or operating system - it's the user experience that's important," he said. "It's not about selling another PC or laptop - this is more like an iPod or Wii console. It can be used for play, to access the Web or for general connectivity." IDC PC analyst, Liam Gunson, said breaking the magical $500 barrier could be a major factor in establishing the product.

"Price point has always been a key thing in the A/NZ market - for example, we saw strong demand when PCs and notebooks went sub-$1000," he said. "The question is whether the market will see this as a laptop or as a different type of device."

Gunson said consumers wanted to be connected more than ever before and pointed to a shift towards devices that help users stay online anywhere.

But while other Asia-Pacific countries were quick to adopt compact laptops, Australia had a history of dismissing smaller form factor machines for 15-inch models, he said.

"The Australian market is not as strong an adopter of small form factor notebooks as other countries, but then these devices have traditionally been more expensive than the 14-inch or 15-inch models. Now we have a lower cost product coming out," Gunson said.

Another hindrance could be the Linux operating system. "If users accept this as another connectivity device, then it's possible they won't be too worried by the operating system," Gunson said. "But the fact is it looks very much like a laptop, so it's hard to think of it as any other kind of device."

Queensland-based education reseller, Coretech, has several Eee PC evaluation units with schools. General manager, David Wain, said there had been a lot of interest in the product but the jury was still out on whether it would be widely adopted. He said the state's Department of Education and Training was also looking at the product.

"One of the things that interests schools is low cost. The other thing is its robust nature because of the use of fl ash memory," he said. "It could mean they're able to roll out devices to the younger kids." But Wain pointed out many other PC-type devices which had generated a buzz in the education sector, such as the PDA, had not been winners.