META Report:Pocket PC 2002 - Page 1

Oct 25, 2001

CIO Update Staff

News Item: Pocket PC 2002 personal digital assistants (PDAs) from Compaq and Hewlett-Packard are appearing on store shelves, while two new players - NEC and Toshiba - are showing prototypes and promising to bring production models to stores soon. Casio PDAs with the new OS are expected shortly, and Symbol announced two new ruggedized Pocket PC 2002-based PDAs.

Situation Analysis: Although Pocket PC 2002 does not introduce any revolutionary new technologies, it has made several important evolutionary steps that should make it more useful to more business users. However, we expect the Pocket PC to appeal primarily to enterprise users, where its relatively high-cost ($500-$700), feature-rich environment is not a hindrance (compared to cost-driven consumer expenditures where Palm and Handspring compete fiercely for market share, and where new low-cost entrants are beginning to appear).

In the past, Pocket PC (and earlier Windows CE) PDAs have been criticized for their relative complexity of operation and lack of simple facilities when compared to the rival Palm OS-based PDAs. Pocket PC 2002 has made many of these operations simpler and more user-friendly, and though its interface still is more complex than that of Palm, for many users it offers much greater capabilities that make up for such complexity. Indeed, with its Pocket Outlook, Pocket Word, Pocket Excel, and Pocket Internet Explorer, enterprise users find a close affinity to the Microsoft-dominated PC world of their daily desktop applications, and an easy connection for users of Exchange.

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With Pocket PC 2002, Microsoft's new reference design has forced all manufacturers to move to an ARM core-based processor, with the beneficiary of this decision primarily being Intel with its StrongARM processor chip. Indeed, every new Pocket PC to date utilizes this chip, compared to the past, when only Compaq employed it. This standardization benefits software vendors that now only need to supply compiled programs in one flavor, versus the multiple flavors of previous generations. By contrast, all four Palm OS PDA manufacturers (Palm, Handspring, Sony, and HandEra) use the same Motorola DragonBall processor, so almost all third-party software would run on any of their platforms without the need for changes.

Microsoft has also mandated that all Pocket PC 2002 PDAs use flash ROM to hold the operating system. Although this adds an incremental increase to the price of the units, it enables the vendors to provide downloadable upgrades for the OS that can be flashed into ROM. Previously, only Compaq's iPaq and some Palm PDAs provided this capability. Owners of PDAs that do not use flash ROM cannot upgrade their systems when new versions of their OS appear. Owners of PDAs from other suppliers are required to buy a new unit if they want the latest version of the OS - a costly pill to swallow for users that paid $600 for a device.

Manufacturers that move to flash will alleviate this problem, but such a move will also enable them to add enhanced features and functions and upgrade those functions (including customizations for particular enterprise users - i.e., special screens, customs portals, drivers, etc.). And while black-and-white units are possible, we expect vendors to offer only color units (a recent black-and-white iPaq offering did not sell well).

All this processing power, color display, backlighting, and peripheral support come with a price in battery life, and many users have complained that previous versions of Pocket PC devices have had very limited battery life. (Pocket PCs are much more power-hungry than Palm devices.) New versions of Pocket PC PDAs include high-power Lion batteries, and several are designed with removable batteries for user-swapping during extended use so recharging can be done less often.

Microsoft's clear focus on the enterprise is evident in its strong support for multiple networking technologies. Under the covers, Microsoft has added drivers for both Bluetooth short-range wireless and 802.11b wireless Ethernet, enabling Pocket PCs to run either built-in wireless interfaces (in future units not yet on the market) or interface cards. This will be an interesting feature for users in offices equipped with 802.11b wireless LANs, enabling them to check and send e-mail, or check internal information sites and even Web sites from wherever they happen to be in the office or on the plant floor. The latest version also supports virtual private networks and has a Windows Terminal Server client included to provide network encryption and strong authentication to corporate networks, and enable thin-client access to enterprise applications.

Pocket PC has also lagged Palm in the number of third-party software developers selling products for the platform. Although some Palm products (e.g., several word processors and spreadsheets, e-mail attachment viewers, e-mail interfaces) are essentially replacements on the Palm platform for Pocket Office and other native Microsoft functionality, others offer a wide variety of personal and potential corporate functionality. However, an increasing number of those developers and others are bringing out software for the Pocket PC 2002 platform.

Despite Palm's early lead in development support, Microsoft has an incredibly large audience of potential developers already using its development environments (e.g., Visual Basic). As it adds Pocket PC-specific libraries and tools, Microsoft will rapidly surpass Palm in enterprise software deployments. Further, Microsoft is producing a version of .Net Compact Framework to work with the Pocket PC (and other WinCE platforms), giving these devices an advantage over Palm in future .Net environments.

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