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FEATURE Where have all the notebooks gone?

FEATURE Where have all the notebooks gone?

Or, more importantly, where are they going? After an initial heady rush of demand for mobile computers, the market has flattened somewhat in the past few years. ARN's Matthew JC. Powell asked around to find out what changed, and what opportunities still exist in a more competitive mobile marketot long ago, growth in the notebook computer market well outpaced that of desktop computers. On the basis of sales growth in the early '90s, many observers confidently predicted that by early in the next century notebooks would account for more than half of all computer sales. A more mobile workforce, companies distributing their operations, and a rise in telecommuting were all heralded as leading the change.

Then between 1996 and 1997 growth figures fell off dramatically - from about 25 per cent down to less than 7 per cent year on year. While growth in the overall PC market did not appreciably slow down, it became obvious that more and more customers were bypassing notebooks in favour of their sedentary cousins.

Gradually, that growth has started to edge back, with IDC estimating 9 per cent growth from 1997 to 1998, and predicting 16 per cent growth into 1999. Even with that growth, notebooks no longer look like achieving the pre-eminent place that was once predicted for them any time soon.

According to leading vendors, the slump was caused mainly by extreme shifts in the entry level price of computing, which in turn fundamentally altered the computing habits of the buying public. Fuelling the return is an emphasis by vendors on high performance and targeting notebook products more specifically at customers.

There is now a wider range of notebook options available than ever before, in terms of performance, price and features. As well as the computers themselves, there are also a wide variety of additional products resellers should be considering in order to give themselves an edge in what may well become a boom segment again.

Talking to the market leaders

Toshiba made the decision over a decade ago to specialise in notebooks, a strategy that has delivered it a commanding lead in this lucrative market. Matthew JC. Powell spoke to Toshiba Australia's Ralph Marshall, national marketing manager, information systems, and Laurie White, product manager for information systems, about what has caused the reality of the notebook market in 1998 to differ with what the market expected five years ago, and while we were on the subject, to offer some ideas about where new growth might come fromARN: According to figures provided to ARN by IDC, Toshiba's market share in notebooks is 31.6 per cent, which adds up to a share of 5.1 per cent in the overall PC market. It's a strong position by any measure.

Marshall: Toshiba is the market leader in Australia by about three or four times the share of our nearest competitor, and the first quarter this year has been strong for us. We finished 1997 with 42 per cent of channel sales, and about 35 per cent of the total notebook market.

In the first quarter of this year that channel share increased to about 49 per cent.

About 80 per cent of notebooks are sold through the channel, and all of our sales are through the channel. We're one of the few vendors that's been 100 per cent committed to the channel.

What do you think is driving growth in notebook sales, both for Toshiba and the market in general?

Marshall: For the market in general, IDC has said there's a bit of a slowdown in growth in the notebook market. It's always been an area of strong growth, but the growth rate is coming down. It's saying only about 9 or 10 per cent unit growth this year over last year.

I think it's over emphasising the price gap with desktops. Low-priced desktops, like the sub-$1500 ones we're seeing in Australia, have taken some demand away from notebooks, but we haven't seen that much reduction in desktop prices in corporates and businesses. They're still sticking with Compaq, HP, IBM, even Dell.

Has the push to lower-cost desktops really had that much effect in any market in this country?

White: In the US there's been a lot of talk about how the entry point for a computer has gone below $US999. It's like a psychological barrier for the home market.

Marshall: It's really home and soho where that's relevant.

White: It is. There was also the Oracle Network Computer idea - a very small, low- power device that was around $500. But nobody bought them. And what we're seeing now is that for $US1000 there's actually a good market, in the home market, for a PC. It's an area that hasn't been tapped into before because the technology costs haven't allowed it. Now you're seeing a lot of people buying these cheap PCs that wouldn't have bought a computer before.

And can you see that trend for cheap but limited PCs becoming a factor in the Australian market?

White: We haven't seen it yet here, but we are starting to see some low-cost notebooks coming through. And that's also reflected in the US. It's interesting, in that we might see the low-cost desktops have an impact, but right now we're seeing more of the impact of the lowering of costs of technology for notebooks.

We've got a range of notebooks for under $3000, and for the first time we're attacking a section of the market that would normally have gone for high-end desktops.

Marshall: From a strategic point of view, that entry price point of desktops is suggesting that our overall notebook demand is going to gradually reduce, unless we also get down into those lower price points. I disagree with IDC that that's a major suppressing factor here in Australia. It published that before our latest releases, which are quite affordable. We're growing, year on year, about 25 per cent.

White: We're also growing our market share, and the lines are blurring between the higher-end desktops and entry-level notebooks in terms of price. Our customers are taking a step back and looking at the price/features equation and saying "hey, maybe I need mobility". Mobility may have been out of the question because of the premium before, but they're now taking a serious look at a notebook. The retail market is even starting to realise that and look at our products.

Marshall: It's one thing to have a no-name notebook at that low price point, it's another to have quality brands.

Customers appreciate that reliability is an issue, ruggedness is an issue, so to have a Toshiba product there for $2700 really opens the minds of the retail channel for soho and consumer markets.

In terms of that consumer market, Toshiba is not a name that is really recognised as a computer maker in the way that IBM or Compaq is, because you don't do desktops. When consumers think of Toshiba they think of microwaves. Does that have an effect on your brand recognition in that part of the market?

Marshall: We did some brand recall studies a while ago in the retail and consumer market, and definitely Toshiba was microwaves and TVs and that sort of thing.

Our target markets have been corporate and government and small to medium businesses.

So, obviously in the consumer market that doesn't help.

White: It doesn't hurt though, either. It helps to have a name that consumers recognise as a good name. People recognise the quality of our home appliances and that carries over to notebook computers. Also, in the US we have started selling desktop computers, but we don't do that here yet.

What other factors besides price are motivating growth in notebooks at the moment?

Marshall: There are new markets at the entry level, but there is also expansion of the notebook market within business and government organisations, because of that more cost-effective solution. The first people in a business to get notebooks are executives, then the sales force. Our studies tell us that sales force and field staff mobilisation is still the biggest future opportunity. They're the ones who are out between offices, meeting customers, fixing things up.

White: We're finding in Australia in particular, businesses realise that by deploying notebooks throughout their sales force they can get an extra two hours of productivity a week from mobile workers.

That means the machines pay for themselves over a period of about two years.

Is that just a matter of flexibility?

Marshall: This is a pet theory of mine. There is a real "pushback" from a lot of people in organisations about quality of life, and the radical cuts to infrastructure and staffing in organisations. Notebooks can be a real pain. They can be like mobile phones, where you can be contacted day or night. With a notebook you can be expected to work wherever you are.

However, it's a two-edged sword with flexibility, because your staff are able to leave the main office if they have to, if there's family reasons, or if they just prefer to telecommute, they can do that and still get critical work done. That can lead to an improvement in quality of life.

I've always believed that in the corporate and government space price wasn't really a factor when it came to notebooks. I always believed that those customers looked more for a feature set. You're saying that's not the case?

Marshall: The issue is more one of return on investment (ROI). The market's grown so fast there's had to be more appreciation of the value of ROI. The first notebooks, because they went to high-paid executives, were seen as status symbols. They were too expensive to be deployed widely in organisations. That's when notebooks were 10, 12 grand or more.

The gradual and inevitable reduction in prices has made it more attractive to roll out notebooks en masse. The gap in price and technology between notebooks and desktops has narrowed of late - corporate desktops have really remained fairly stable, while the technology in notebooks has improved and the prices have come down. So where you might have deployed a desktop before, it now makes sense to give someone a notebook.

White: As the newer processors from Intel have only marginal improvements in performance, you might have a 333MHz desktop and a 266MHz notebook but the performance isn't that different. The performance gap is narrowing. There's not as much difference as you'd expect from the clock speed.

In the US, there are still a lot of people who have a desktop computer but they're also given a notebook to use separately. We're seeing less and less of that in Australia. It really is a matter of desktop replacement here.

You've said there's a growing demand for mobility in the consumer space. What's driving that?

White: In the consumer space, one of our biggest programs is the education business. We often find that we're selling a notebook to a student to use at school, but the parents will also use it at home to type up their own letters or use the Internet. Internet usage in homes is becoming huge, to the point where it's taking time away from TV. So we're selling a lot of computers for use as school computers that are then taken home for the Internet.

What about soho? Why are small businesses suddenly so interested in being mobile?

Marshall: It's also a matter of usability. A lot of small businesses literally don't have a lot of space, and a smaller, more compact computer can fit more easily on a desk with all the other things a business needs.

But also, a lot of people who work from home are freelance journalists, or consultants, so they do go out to visit customers or clients. It's one of the fastest growing areas for notebooks, in soho and small to medium business. The lower down you go in terms of price, the faster it's growing.

In the past, the price was a bit prohibitive, and the cost/benefit advantage may not have been there.

But now it's more like a 50 per cent premium from a cheap desktop to an entry-level notebook. And you're not comparing apples to apples if you compare a $2000 PC to a Toshiba notebook. There's a real advantage in terms of quality.

White: And for $700 you're buying that mobility. Look at that $700 worth of mobility over two or three years.

Marshall: Two hundred dollars a year, four bucks a week. After tax, that's about $100 a year, so more like two bucks a week. It's the price of a beer that you'll now have time to drink because you've got a notebook.

But you might not want to , in case you drop your notebook. The growth of notebooks against desktops in terms of share of the overall computer market has flattened lately. At first, notebooks grabbed a lot of share, but it's stabilised now to the point where notebooks and desktops are growing at roughly the same rate. What's caused that flattening?

Marshall: A while ago IDC forecast that by 2000, notebooks would be about 40 per cent of the overall market. But they didn't anticipate the growth in the consumer market. I don't think anyone anticipated that. The home market for desktops is a major chunk of the total PC market now - something like 30 per cent. That came out of nowhere.

In the short term, one thing I do agree with IDC on is the consolidation of the vendors, far more in notebooks than desktops. In Australia, 85 per cent of the volume in the market is held by the top five or six vendors. That's incredible consolidation, while in desktops there's about 20 or 30 vendors, maybe more.

White: The barrier to entry for vendors is much higher in notebooks than desktops. Anybody really can assemble a desktop - it's a $50 metal box with a power supply, and you can put whatever motherboard you want in, it's all standard components. Nothing is designed to a particular size or weight or heat or battery life.

Toshiba has great advantages because we design our own hard drives, screens, CD-ROMs. In fact a lot of our components are used in those other five vendors. It costs a lot to build that kind of technology and design it.

Interview: Advanced Portable TechnologiesAPT is a distributor that specialises in add-ons and peripherals for notebook computers. Matthew JC. Powell spoke with Felix Wong, APT's finance and technical director, about how resellers can find opportunities to make a few extra margins in an increasingly competitive notebook marketARN: What's the single most popular additional item customers are looking for when they buy a mobile computer?

Wong: The largest opportunity for add-on sales with notebooks is in communications and networking. People buy a notebook and they want to connect to the ethernet or token-ring LAN in the office, or they want a modem to get onto the Internet or to get their e-mail.

They can get that either as one card or two, depending on the product they buy. There are millions of these cards on the market and they range widely in price and quality. We're about to release a product which uses CardBus, so it's 32-bit as opposed to the older cards which are 16-bit. And it's got both 10Mbps and 100Mbps ethernet on the one card and a 56K modem. Plus it's got a technology called digital phone interface (DPI) that allows you to connect the modem straight into a digital PABX.

The obvious next question is about connecting to the GSM network. The GSM network, wireless communications, would be the next biggest area. That means if you've got an Ericsson or a Nokia or a Motorola phone, you can buy a card that connects to that phone and send data at 9.6Kbps wirelessly. That's good for getting e-mail or getting onto the Internet for quick information, but you wouldn't want to do Web browsing with that.

Wong: You wouldn't want to do a lot of Web browsing, but sometimes you just want a bit of information and if you know where it is, 9.6Kbps is fast enough and you can turn off the images, which makes it a lot faster. But it's not a fun thing - it's a requirement you'd suffer through.

You used to just be able to buy these things as a card with a cable that connected to the phone. What's coming out now are things like the Nokia Cardphone ($623 RRP), which is a phone and a card in one unit so you don't need any cables, which is quite amazing.

Then there's another solution which is the soft GSM card. In other words there is no card, there's a cable attached to the serial port and some software that makes the CPU work as the actual card device, doing all the translation and control and communications with the handset through the serial port. That's much cheaper. It's about $299 for that kind of solution, about $499 for a card solution and about $699 for the card and phone in one.

The other thing you can do is get particular modem cards with a GSM capability, then source the particular cable that goes onto a particular phone. There are only two cards on the Australian market that are licensed GSM combo cards. (Portable Addons Freespirit, $535 RRP, and TDK 5660, $481 RRP). Nokia, Ericsson and Motorola have their own GSM cards, and obviously if you buy them you have the right interface and the right software. If you buy one of these licensed GSM cards you can use it as a normal 56Kbps modem, but you can also buy an upgrade kit specific to the phone you've bought.

The interfaces on GSM phones are proprietary interfaces - Nokia and Ericsson own that technology and that interface. The manufacturers of these licensed GSM combo cards have paid royalties to those owners to use their interface. The other GSM cards on the market are typically reverse engineered and they don't support all of the functions. Obviously Nokia and Ericsson aren't too keen on them either.

Ericsson's also got an infrared device (DI 27, RRP $357) which plugs into a mobile phone and communicates with the computer through the IRDA port at 9.6Kbps. So there are no wires, but it's still fast enough to get e-mail.

What about larger devices like CD-ROMs or DVD?

Wong: There's a good opportunity for resellers in the very thin notebooks, such as IBM's ThinkPad 560 or Digital's HiNote 2000. HP's got one, Toshiba's got several. These are too thin to have their own CD-ROM built in. There are now external CD-ROM devices that connect through the PC Card slot and power off the notebook. You can also get external CD-ROMs that use the parallel port, but for that you need mains power or a separate power supply, which can be cumbersome. We have two devices that power off the PC Card slot, one from VJet and one from TEAC.

How do they affect battery life?

Wong: They kill the battery. It would reduce the battery life by about 25 per cent. But it's a good solution if you're using your notebook on the LAN in the office where there's mains power.

In terms of multimedia solutions, there are MPEG cards for digital video, and will soon be MPEG-2 cards that support DVD. DVD will be great as a storage device for notebooks, rather than as an entertainment medium as such. It all depends on whether they can agree on standards for DVD-RAM. But if they could get a read/write device into a notebook with the capacity of DVD that would be good.

Then there's video capture cards, cameras, TV tuner cards, videoconferencing cards. These are more for the multimedia buff or someone who wants to play with videoconferencing.

Is the performance of current notebook computers really up to what would be required to make videoconferencing practical?

Wong: That really depends on several factors, such as the bandwidth of your communications. Now that we're moving from Pentium MMX to Pentium II, the sort of compression you can get will mean that even with 33.6 or 56Kbps links, the performance will be OK.

The other thing is the input devices. People can buy a cheap parallel port video camera that uses the CPU to do the capture and screen display of images. They're built to a price and the performance isn't great, but the better the computer gets the better the results will be. We've got a card from Novatek which has its own processor on the card so the actual capture of the image is done by the card, leaving the processor free to do the compression and communications.

What sort of customer is buying this kind of technology right now?

Wong: People who are into imaging, like TV stations for example. Also universities wanting to do videoconferencing over an ISDN link.

I would expect probably in the next six months or so to see a wider use of video-conferencing in business as the technology improves and is more widely adopted. Toshiba already has a notebook (the 750) that comes with a camera built in and is software bundled.

Any other add-ons that resellers should consider?

Wong: Joystick cards, so you can plug in a joystick and play games. The business justification for this is that if you take this computer home and let your kids play games on it without a joystick they're going to wreck the keyboard. The card's about $150, so it's cheaper than a replacement keyboard.

So these are the kinds of things people buy with a notebook. What about after-market opportunities?

Wong: Things like PC Card hard drives, which are a very easy way to add extra storage to a notebook, and can act as a high-capacity floppy drive for exchanging large files between notebooks. It's very much a vertical thing, not horizontal. You don't see everyone having a need for one of these, but some people may need several.

What are the dangers for a reseller looking to make a bit of extra margin by bundling cards and extras?

Wong: The biggest danger is in not choosing a well-supported card from a known vendor. You might make a good margin with one-off deals and so forth, but then the time you spend in supporting that and servicing it could well outweigh what you made. We work closely with all the notebook vendors and the card manufacturers we deal with, so we're very familiar with the products, and we can support them as if we were a vendor. If a problem arises it's often not just with the card or with the computer, but with a specific combination of the two, and that's where we can benefit.

Products

Acer

Acer Extensa 710. Acer's Extensa 710 series Pentium II models claim power on demand, all-in-one convenience, multimedia innovation and attention to durability, expandability and flexibility.

There are three models of the Acer Extensa 710 notebook, all of which harness the 233MHz version of Intel's PIIs. They are differentiated in the following manner.

The 710dx has a 12.1in standard clear colour screen, 2.1GB hard drive and has an RRP of $4699The 710t also has a 12.1in display and is the better quality TFT variety. Hard disk storage improves to 3.2GB while the $5699 RRP price tag illustrates the better featuresAt the top of the range is the 710te, complete with 13.3in TFT display and a 4GB hard disk. It's RRP is $6699All three Extensa 710s offer additional security, utility for multiple users and exchangability between different operating systems. Efficient power management allows users to achieve up to four hours of operating time out of each battery charge (depending on usage) with an on-screen display allowing constant monitoring of power levels. vAppleApple's new PowerBook G3 series represents a marked increase in performance over previous models, but also places high emphasis on industrial design. All feature faster internal bus speeds than previous Apple models that, the company claims, makes their performance far greater than even Pentium II-based desktop computers.

While Apple previously offered only one notebook based on the G3 processor, it now offers three, differentiated by both screen size and processor speed.

All feature 32MB SDRAM (expandable to 192MB), 2 to 4MB SGRAM, 10Base-T ethernet, CardBus expandability and hot- swappable expansion bays. Hard drives are available in 2GB, 4GB or 8GB capacities, and a 20x CD-ROM drive is included. Although Apple does not currently offer a DVD-ROM drive for its notebooks, one is promised for the next few months, and Mac OS 8.1 already supports DVD file formats natively.

The lowest-priced machine has a 12.1in STN display and 233MHz processor and a 66MHz internal bus. Even though the processor speed is the same as the previous G3 Power-Book, the faster internal bus increases performance demonstrably. The PowerBook G3 233 is available now for $4495.

The G3 266, a model with 13.3in TFT display and 250MHz processor, costs $7495, while the new top model, the G3 292, with a huge 292MHz processor, costs $10,995.

Compaq

Compaq's input to the Pentium II notebook market comes under the banner of the Armada 7800 family. Utilising the powerful 266MHz Mobile PII, the Armadas have 13.3in CTFT screens and launch one of the industry's first notebook PCs with Accelerated Graphics Port, incorporating a dedicated 66Mhz graphics bus for enhanced video and graphics performance, according to Compaq.

Weighing in at just 3.4Ð4kg, depending on user configuration, the preinstalled Windows 95 or NT Workstation 4.0 platform is ACPI ready, PC97 compliant and year 2000 compliant. The 64MB synchronous DRAM is expandable up to 132MB and is serviced by a high-capacity 5GB SMART hard drive with DriveLock security and Prefailure Warranty.

An integrated AC adapter and a 33.6KB modem are included as standard equipment.

Bearing discount retail prices from $7496 RRP to $7871 RRP through participating Compaq Authorised Resellers, the Armada 7800 A78 series notebooks are definitely aimed at those in need of a powerful remote computer.

Digital

Digital's latest notebook offering arrived in April this year. On the back of the new HiNote VP765 Pentium II-based processing power, superior presentation graphics and imaging capabilities are introduced to the brand along with higher resolution 13.3in display.

The 20x CD-ROM, 6GB user-removable hard drive, expansion bay and enhanced support for videoconferencing provide cutting-edge technology and investment protection.

New Dual Bus Architecture that has been incorporated into Intel's PII mobile processor gives customers better performance and increased bandwidth, according to the company.

Available with Windows 95 or Digital's enhanced version of NT Workstation 4.0, the HiNote VP765 also contains power- management capabilities.

Under the optional new service offerings, announced with the launch of HiNote VP765, users can benefit from express courier collects and returns for repairs, on-site service if required, telephone support for software applications, product update subscription services and localised warranty repair in all states.

On sale now through Digital's channel partners, the HiNote VP765 is tagged with an RRP of $6700.

IBM

When IBM launched its latest range of ThinkPad notebook PCs in April this year, the fanfare included an explosion of new servers, networking solutions and BX chip-based PCs. In one big bang to grab maximum advantage from the new products, IBM demonstrated its vision of remotely connected workgroups which will be predominant in the future and enabled by powerful multitasking notebooks, easy Internet access and flexible networks.

Incorporating the latest CPU technology, the new IBM ThinkPad 600 and 770ED notebooks build on the award winning heritage of the company's mobile computing range. These are possibly the Rolls-Royces of notebooks at the moment.

Mobility and power

At just 3.5cm in width and weighing only 2.55kg, yet still managing to punch Intel Pentium II processing power at either 233MHz or 266MHz clock speeds, the ThinkPad 600 represents a good balance between mobility and power. Bright 13.3in TFT screens grace both models, with 3.2GB or 4GB hard drives, 32MB RAM (expandable to 288MB), integrated CD-ROM and a 56Kbps modem.

With the 233MHz chip on board, the ThinkPad 600 carries an estimated street price of $7794, while the 266MHz version will go for $8970. The 266MHz PII processor is standard fare in the 770ED model, an enhancement of the award-winning ThinkPad 770. A large memory capacity (8.1GB HDD, 64MB RAM expandable to 288MB, full MPEG-2 playback, 3D graphics and an integrated DVD drive are additional features of the 770ED.

NEC

As we go to press the NEC Versa LX family of PII-powered notebooks were being launched in Australia. After scoping the competition, NEC this week introduced two new 32MB RAM, 4GB HD 233MHz models, with either a 12in or 13.1in screen, and a deluxe 64MB RAM, 5GB HD 266MHz product with 14.1in of high-resolution display.

The Versa LXs constitute what NEC call the Universal Series of notebooks. They are all built with the same new chassis which will not be tampered with for at least 12 months. Components are interchangeable. Hard drives, peripheral components and docking bays are compatible with each other across the range.

NEC is also serious about guaranteeing the longevity of its improved screens that deliver a claimed 20 per cent improvement on clarity and weight reduction. With an aggressive return policy, any screen that loses six pixels or more, anywhere on the screen, will be replaced, free of charge.

At press time, prices were not available for the Versa LXs but ex-Toshiba man, Arno Lenior, now notebook product manager at NEC, said that pricing would be very aggressive.

Toshiba

Toshiba has introduced a number of machines in recent weeks based on Intel's mobile Pentium II processor.

The top machines in its "Business professional" range, the Satellite Pro 490CDT and 490XCDT, both feature Pentium II processors, at 233MHz and 266MHz clock speeds respectively. Both feature 32MB RAM, expandable to 160MB, 3.8GB hard drives and 20x CD-ROM. The 490CDT features a 12.1in TFT display capable of displaying 800 x 600 pixels, while the 490XCDT can display 1024 x 768 on its 13.3in display. The 490CDT costs $7408 RRP and the 490XCDT costs $8565.50 RRP.

The new jewel in Toshiba's crown, though, is the Tecra 780DVD. The machine offers a feature set including: 266MHz Mobile Pentium II; 64MB RAM expandable to 128MB; 4.8GB hard drive; 13.3in TFT display capable of 1024 x 768. It's also the first notebook to ship standard with a DVD-ROM, which sits in a swappable drive bay and is interchangeable with a 16x CD-ROM. Rounding out the multimedia offerings, it also includes an S-Video port for connecting to a television, stereo speakers and an optional video camera. The Tecra 780DVD sells for an RRP of $11, 459.25. contactsAcerTel (02) 9870 1999Fax (02) 9878 6227AppleTel 1800 025 355Fax (02) 9452 8160CompaqTel (02) 9911 1999Fax (02) 9911 3919DigitalTel 13 2393Fax (02) 9561 7555IBMTel 13 2426Fax (02) 9354 7766NECTel 13 1632Fax (02) 9930 2049ToshibaTel 1800 021 100Fax (02) 9887 3201


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