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FEATURE Take note

To get an idea of the state of play in the notebook market, ARN spoke to a number of the top (and near-the-top) vendors, to ask them how they see themselves and the notebook industry. We found that all vendors see notebooks as major sources of revenue and growth (even vendors who are struggling in other areas), and most believe we are about to experience the age of desktop replacementIt happened very quietly. At some point in the last few years, people stopped saying "laptop", and started using the more respectful "notebook" instead. Back in the "laptop" era, a portable computer meant a compromise in performance for an extravagant price. Most computer makers had one or two laptop models, if they had any at all -- and they were aimed at high-flying early adopters, more interested in the status symbol than in getting genuine performance out of their machines.

Those days are over. Even the least expensive notebook computers offer reasonable performance, many of them for quite accessible prices. At the higher price points, it is now reasonable to expect a notebook computer to equal or even outperform the desktop computer in your office or home. The notebook has come into its own as a legitimate market segment.

NEC

NEC's notebooks generally fall into three categories, but within these groups they overlap. That is, the top end of the low range edges into the mid range and it's the same for mid range to high end.

At the entry level is the 2700 series, aimed at SOHO, small to medium businesses and fleet customers. The mid range consists of the 5000 series for road warriors and weight- and space-conscious customers. What NEC calls its "mid-high" range is the 6000 series, described as a "serious desktop replacement". The 6000 series is fully dockable.

Julian Walthew, NEC's national marketing manager, told ARN "price is secondary to power for most users". He says there's no longer any need to make certain sacrifices to use a mobile computer.

The notebook market is growing for NEC, and customers are still looking for desktop alternatives.

Sales have dropped recently, but Walthew expects that the next set of figures should show growth.

Not surprisingly, NEC sees its main competitors as Toshiba, Compaq and IBM.

IBM

Big Blue offers its notebooks in the categories of "entry level", "general business" and "enhanced". The distinctions between categories lie in both price points and in technical specifications. The entry level is represented by the ThinkPad 310, offered through retail outlets for SOHO, home users, students and small business. The ThinkPad 380 is the lower-specified of the general business models, designed as a desktop replacement for corporate users, but at a price point suitable for Soho customers.

The ThinkPad 560 is an ultra-slim lightweight model designed for mobile users who appreciate a balance between weight and functionality.

At the top end are the enhanced ThinkPads -- the 760, 765 and 770 models. These are described by IBM Australia's communications specialist, Rebecca Keyworth, as "advanced leading edge technology" designed as a desktop replacement for corporate executives and senior field professionals.

While IBM declined to comment on questions of market penetration by notebooks versus desktop PCs, Keyworth was willing to say that IBM saw Toshiba and Compaq as its competition.

ACER

Acer Computer has two notebook ranges: the multimedia business port-ables, Extensa 390C and 390CX; and the performance desktop PC replacement, the TravelMate 7100 series.

According to Antonio Leone, Acer's product specialist for portable PCs, the company phased out its low-range 355 series of notebooks last year. That series didn't have CD-ROM drives and Leone says it was discontinued because the volumes sold didn't justify stocking the model.

"The market's moving to a complete multimedia solution," Leone said. "The high-end performance user is wanting to use the notebook as a desktop replacement. The Extensa series is a desktop equivalent or extension."

Leone says the needs of customers who buy the performance desktop PC replacements are high.

They want long battery life, a complete multimedia solution, robust construction, connectivity and up-gradability. The busi-ness portables have a focus on multi-media, upgradability and strength.

Is the notebook replacing the desktop? "Not at this stage," Leone said. "But the gap is narrowing. I guess a lot more would be looking to notebooks as a desktop replacement."

He says the continuing upgradability and connectivity of notebooks is heading the charge for their popularity. He also says the time lag between processors arriving on the desktop and their following availability for portables is continuing to shorten.

Leone says the main drawcard for his notebook range is the Sony lithium ion battery and Acer's heuristic battery management technology. In a departure from standard technology, the management system "learns" the power usage pattern of users and automatically powers down components of the computer that consume energy when it's not in use. Acer says the battery is fully recharged in two hours, or four hours if it's charged while in use.

Leone says Acer's main competitors in the notebook market are Compaq, Toshiba and IBM.

Toshiba

Ralph Marshall, national marketing manager for Toshiba, says the company defines its notebooks not so much by price and performance specifications but rather by the customers they target. Value conscious users are addressed by the Satellite series, intended mostly for consumer, SOHO and small businesses.

Corporations and government needs are addressed with the Satellite Pro, with its combination of good features but not at the absolute bleeding edge. Corporations may find it difficult to standardise on the Tecra (Toshiba's high-end desktop replacement), because of its rapidly changing specifications. The definition of the Satellite Pro tends to stay stable for longer.

Both the Satellite and Satellite Pro are defined as "true mid-range" notebooks (Toshiba doesn't call any of its models low- end). The emphasis is on connectivity, weight and portability.

The Tecra is a desktop replacement aimed at early adopters, corporate, small business, multimedia developers and engineers. In short, those with "the need for speed". Its emphasis is on speed, total on- line multimedia performance, DVD and videoconferencing.

The Protege and Libretto lines are intended for the corporate market and mobile executives.

Marshall says the user targets are often most clearly indicated by the machines' price points. The next most significant factors are weight and processor speed.

He told ARN: "Price point and need for speed are the determining factors. The desktop replacement is a reality."

Improved efficiency and technology means high-performance notebooks becoming cheaper. The performance of these machines, coupled with their portability, means that they increase productivity to the point where the ratio of cost to productivity may be well in favour of the notebook for many businesses.

Toshiba doesn't seem too worried about its opposition at this stage, since it's a fairly comfortable leader. IDC and Toshiba both predict that, by the year 2000, 25 to 30 per cent of the total market will be Toshiba's.

Dell

Dell offers two lines of notebook computers: Latitude and Inspiron.

Latitude is intended for major accounts, corporate and government customers, and office networking. Inspiron is more a transactional product, aimed at SOHO and advanced home users. The emphasis, again, is on "bang for buck" -- the latest technology for the best value. New technology goes first to the Inspiron, while Latitude is designed for a long transition cycle.

Erin Mikan, portables product manager of Dell, expects that notebooks will become more popular as more companies make their staff mobile for home and field work. She says the price difference is narrowing between desktop PCs and notebooks. The main factor driving price drops will be if and when screen prices come down and networking PCMCIA cards drop. Mikan says the peripherals are the expensive part.

Convenience and desk space are also considerations for choosing a notebook. Dell will soon be adding new technology with the Inspiron 3000, and after that the next big thing will be Pentium II-compatible peripherals. Dell's models continue to grow with technological changes.

Hewlett-Packard

HP's entries in the notebook game range right across the field. At the entry level is the OmniBook 2000, designed for education, small and medium business, with some overlap into large business. In the middle of the range is the OmniBook 5700, a fully multimedia-capable machine. The top of the range is rounded out by the OmniBook 3000. Equipped with the latest Tillamook CPU, 13.3in screen and 4GB hard drive the 3000 is aimed squarely at large business and high-end enterprise applications.

HP also has a sub-notebook, the OmniBook 800, which was voted Australian PC World's Notebook of the Year for 1997.

Rob Hartnett, HP marketing development manager corporate PCs and mobile computing, says HP is a very new entrant to the notebook market. To gain some field experience quickly, the company recruited several seasoned Apple managers and has given the products a different feel. That new feel is, according to Harnett, summed up in the slogan "Bigger, better, faster, more".

HP's problem is awareness -- Hartnett says not enough people know HP makes computers, and it's the same situation with notebooks. According to Harnett, HP was the first to launch a notebook with the Tillamook chip.

HP has just had a "sensational period -- January was our biggest month ever".

Harnett says HP's main push is to the channel, to make resellers aware of products so they can push to customers. Following the lead of the USA, HP is lowering prices on its notebooks, closing the gap to the price points of desktop PCs.

Internally, 80 per cent of HP's PC installations are notebooks. "Notebooks are not yet at a price point where major corporations could afford to install them," Harnett said.

"It will be two to three years before it starts to get easier to expand the notebook market."

Desktops get the latest goods sooner, and there is still a six-month gap between desktops and notebook technology.

Harnett identifies HP's main competitors as Toshiba, Compaq, IBM and Acer.

Apple

Once king of the notebook roost, Apple now languishes in the lower half of the top 10 makers. However, it still dominates in the education and "creative content" markets. It is these markets that it addresses squarely with its two lines of notebooks.

At the top end, Apple offers the PowerBook 3400 and PowerBook G3 lines, designed with multimedia and publishing markets in mind. The PowerBook 3400 will likely be replaced shortly, as the company moves to transition its high-end offerings to the newer, faster G3 processors. The G3, unique to Apple's offerings, is said to outperform Intel's Pentium II for most tasks, and is the same chip the company now offers in its high-end desktop machines.

For education markets as well as mainstream users, Apple offers the PowerBook 1400 series. Bill Harrington, product marketing manager of Apple Australia, says the highest specification 1400 would be a "good delivery platform" for multimedia, but it is not marketed at content creators.

He says the 1400 line is expected to have a longer lifespan than the 3400, because its target market is schools, which require longer product lifecycles and upgrade paths. He says that enhancements to the 1400's specifications will only be made where the low price point can be maintained.

Harrington is not worried by Apple's lack of a mid-range offering. He told ARN: "Once you get above a particular price point, customers don't ask what they can get for a few hundred dollars more, they ask what's the best you've got. When we offered PowerBooks for six thousand dollars, they didn't sell well, because those same customers would rather get the best they can for eight thousand."

Unique among notebook manufacturers, Apple offers a product specifically designed for the K-12 education market, the eMate 300. Recently adopted by the PowerBook division (it was formerly a Newton product), the eMate runs the Newton OS and features a smaller than normal monochrome screen. However, its robust design makes it attractive for its specific market. Harrington said: "The customers we sell the eMate to aren't too worried about what OS it's running. It can connect to whatever desktop computers the school already has, and it's tough enough for schoolkids to carry in their bags."

Digital

Digital has two families of notebooks: the value to mid-range VP 700 and HiNote Ultra 2000 Premium. The VP 700 series is for users who focus on "best in class value", while the HiNote is a thin and light desktop replacement.

There are four models in the VP 700 series. According to Aaron Blackman, marketing manager mobile segment of Digital, "the typical customer is the mainstream notebook buyer. The machine is made to be used for meetings, demonstrations and presentations". Users include banks and insurance reps, but Blackman sees the machines as having a fairly wide user profile. Digital has equipped the Australian Federal Police dispatchers with notebooks, as well as Westpac Bank.

Blackman sees a time when notebook sales will outstrip desktops, based on current rates of growth: "For example, last year (1997), 266,000 units were moved, that's 25 per cent growth on 1996. Notebooks are far outpacing desktops."

From a revenue perspective, Digital estimates that last year $US900 million came from notebooks, "that's 25 per cent of the entire PC market," Blackman said.

"The actual cost of notebooks is coming down, but not as quickly as some think." Blackman says that while the average price point of a notebook is $3900, "it'll be $3850 in three years' time".

He says prices drop faster because of vendors' "price migration plans". The price of a notebook drops significantly during its lifecycle, but the next model is always going to be expensive. "The standard cost is coming down a little, but not enough," he told ARN. The main cost of a notebook is the display -- up to $1500.

Blackman sees two main factors driving growth in the notebook space. First, the closing of the price and performance gap between notebooks and desktops. The performance gap has closed, stopping that as a barrier to entry. Second, "portability has made the notebook more of a justifiable purchase". More people are mobile workers, and "the mobile conscious user is really looking for a seamless environment between home and office. There's nothing those guys can't do on the road that they can do in an office."

Digital has developed some Plug and Play tools for Windows NT, including a power management tool. NT wasn't originally designed for portable computers. Blackman told ARN: "Digital offers a whole bunch of extra value adds, aggressive pricing and lots of information on our Web site."

While Blackman can see that notebooks are set to grow steadily, he says "there'll always be a place for desktop PCs". He sees Digital's competitors as Toshiba, IBM, NEC and, ironically, Compaq.

He says that the top 10 notebook vendors are all making pretty good computers, but the main differentiator is Digital's local quality testing. "No other vendor does that," he said.

Gateway 2000

Gateway's range divides neatly into three lines, differentiated by "what the user needs in terms of specifications" according to Michelle Vanzella, Gateway 2000's product marketing manager for notebooks. She told ARN: "We go after a particular specification and then drive for the lowest price point." Gateway builds modular systems to order.

The Solo 2300 is a "volume notebook", featuring entry level functionality, with a reasonable mix of price points and features. The Solo 5100, a new product, is for the mainstream users and road warriors -- a market that Gateway hadn't previously addressed, opting instead for niches. After its release in the US, the 5100 accounted for 30 per cent of Gateway's sales within its first three weeks.

Vanzella said: "We expect to increase our volume in that range overnight."

She says the main factor driving sales of the model were its large screen.

The Solo 9100 is for performance users, intended as a true desktop replacement.

Vanzella told ARN that notebooks are "extremely viable" as a desktop replacement.

"When the Pentium II launches in notebooks, it will be the final nail in the coffin [of desktops]," she said.

Interview: Chuck Dourlet

ARN: What's the state of play in notebooks?

Dourlet: They're becoming a more important part of the enterprise computing decision. They're becoming a more critical component in the computing needs of the corporate community.

That's being driven by a couple of things. The workforce, in general, is becoming more mobile, and all businesses today are needing to increase their focus on customers. So their frontline employees, the key employees who are out touching customers the most, need the latest technology and all the greatest tools so that they can really bring to bear the infor-mation they need when they're visiting customers -- whether they're service employees or salespeople.

So when you increase the penetration of portables, from an MIS and support standpoint it can either be something that creates a lot of problems, or something that solves a lot of problems. It really makes portables more strategic in how they're deployed, and how they fit in with the enterprise is becoming a lot more important than it has been in the past.

Where are the main areas in which notebooks are growing in importance, from a strategic standpoint?

They're growing in importance everywhere, and that's one of the main reasons you see the broad product line we have today.

We have the broadest product line ever in Compaq's history. We have four different product families that address different segments and user needs.

On the traditional "performance" end, which we categorise as desktop-functional equivalents, we have two products: the Armada 7700 family and the 7300. These are really companion products. They share a common set of expansion bases that offer different functionality to a range of user needs. They differ primarily in form factor and a number of key features. The 7700 really addresses the traditional "power user" that you think of as scientists, scientific applications, CAD, financial analysts -- they don't want to make any compromise in any way with this technology. The 7300 incorporates a lot of the same processor and display technology, but it's in a more mobile form factor, around 1.5in thick, and it's really geared for mobile professionals and what we call the professional productivity segment.

The second category is the "high flexibility" category, and the Armada 4200 product addresses that space which is driven around sophisticated users (second- or third-time notebook buyers). They're looking for the optimal combination of functionality when they go on the road. The 4200 is configurable three ways: the slimnote or the lighter weight combination, where it's around five pounds. Then you can add a floppy drive and an extra battery to it, which gives you a full notebook functionality. Then there's a multimedia configuration that adds a CD-ROM and speaker capabilities to give a full multimedia notebook. That meets a lot of different needs depending on who you are and what you need when you go on the road.

The last category, which is probably most important from a customer base standpoint, is the Armada 1500, which addresses what we call the "convenience" or "all-in-one" segment. These are customers that don't want a lot of complexity -- they want a product that's driven by ease of use and an all-in-one design. What the 1500 offers is simultaneous support for a hard drive, a floppy and a CD-ROM. We add to that an integrated AC adapter, so you have one less thing to carry with you, and you have a notebook which is highly integrated, easy to use and very simple. You don't have to think about what you're taking with you when you go on the road. It really addresses the convenience aspects the mainstream user needs.

Those segments comprise a product line that we think addresses all of the user needs today.

Is it fair to say that the "desktop equivalent" is a fairly new phenomenon, where previously notebooks were a kind of "portable compromise"?

There has traditionally been a lag in adopting some technologies from the desktop to the portable space. That's because when something is first introduced, it's usually larger and it uses more power, and there are thermal issues to consider. It has to be optimised before it can go forward into portable products. But the desktop equivalent space is really something that Compaq defined for notebooks with the introduction of some of the first desktop expansion bases, back on the LTE line.

A fairly open-ended question now: what sort of technologies can we expect to see in 1998?

One of the biggest technology introductions we'll see this year is the mobile Pentium II processor. We'll migrate to this processor across all of our products through the year. In addition to the processors, the other big introduction, for desktops as well but especially for notebooks, will be the Windows 98 operating system. The NT 5.0 will be introduced after Win98.

NT 5.0 will be a very important operating system for mobile users because it's the first NT operating system that has a lot of the functionality that mobile users need.

Such as?

Such as ACPI (Advanced Configuration Power Interface), which is an important power management capability that is being added to the operating system. NT 4.0 didn't have power management -- we had to build it on top, it wasn't part of the operating system. We had to do that ourselves.

What about developments in display technology?

Right now 12.1in SVGA (800 x 600) is the standard mainstream display technology on portables. We're seeing 13.3in XGA, which is the 1024 x 768 resolution, on the high end. Through the year I think we'll see that XGA standard becoming more mainstream. There will be some 14in screens, but I think that will be very low-volume, niche products in the very high end, because the 14in screen really starts to drive the form factor and power consumption.

So you don't see the 12.1in being abandoned in favour of the bigger, better latest thing in any hurry?

Actually, just to step back for a moment, we've been talking a lot about features and technology, but something we're seeing a lot in terms of customer purchasing decisions and satisfaction drivers -- the top priorities that customers make purchasing decisions on -- are really changing, for portables and desktops alike. In general, there's a lot less emphasis on speeds and feeds and getting the latest processor technology and focusing more on quality, price, availability, service and support. A lot of the key features that help you integrate into an enterprise environment, in a group of desktops and servers. And that's one of the reasons we think Compaq is uniquely positioned, in our ability to deliver a product line that includes the entire enterprise IT deployment.

Contact details

Acer

Tel (02) 9870 1999

Fax (02) 9878 6227

Apple

Tel 1800 025 355

Fax (02) 9452 8160

Compaq

Tel (02) 9911 1999

Fax (02) 9911 3919

Dell

Tel 1800 808 312

Fax 1800 808 312

Digital

Tel 13 2393

Fax (02) 9561 7555

Gateway 2000

Tel 1300 552 000

(02) 9641 2694

Hewlett-Packard

Tel 13 1347

Fax (02) 9898 7831

IBM

Tel 13 2426

Fax (02) 9354 7766

NEC

Tel 13 1632

Fax 800 802 276

Toshiba

Tel (02) 9887 3201

Fax 1800 021 100


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