From: danforth@riacs.edu (Douglas G. Danforth)
Subject: PERSONAL DIGITAL ASSISTANTS ON HOLD
Keywords: San Jose Mercury News, pen computing, PDA
Organization: RIACS, NASA Ames Research Center
Date: Mon, 16 Nov 92 02:19:16 GMT


San Jose Mercury News (CA, USA)
Sunday
November 15, 1992

	       PERSONAL DIGITAL ASSISTANTS ON HOLD
	 Companies reasses demand for much-hyped device

By Rory J. O'Connor
Mercury News Staff Writer

A mere five months ago, a handful of computer companies began
talking about a revolutionary kind of handheld computer that
experts predicted could revitalize Silicon Valley's high-tech
industry and seize the consumer electronics market back from the
Japanese. But today, even before the first so-called personal
digital assistant has hit the market, the revolution has been put
on hold.

When Apple Computer Inc. Chairman and Chief Executive Officer
John Sculley unveiled a prototype of the Newton last summer, he
confidently called it a breakthrough product that would offer
millions of consumers undreamed-of access to a high-tech future
and open up a new market worth trillions of dollars.

Sculley's enthusiasm spread through the computer industry like
wildfire. U.S. and Japanese companies pledged to build the
computing companions and sell them to eager buyers for a few
hundred dollars each, saying some would be available as early as
next year.

But on the eve of the computer industry's largest annual
gathering, the Comdex Fall exhibition, companies are reassessing
just how quickly the devices will become blockbuster products.

Sculley himelf began backpedaling in September, saying he is
"less and less convinced there is a market for these things in
the near term in the consumer market." The pundits who in the
spring hailed Newton as a visionary breakthrough now say the
consumer market might not explode until the beginning of the next
century.

"Apple has spread a lot of fire and mist and hyped the market too
much," said Jeff Henning, an analyst with BIS Strategic Decisions
in Norwell, Mass.

That's not to say the computer industry has abandoned the idea of
producing what Cupertino-based Apple has dubbed PDAs, or personal
digital assistants. Newton received much praise for its
combination of technologies: battery power, and electronic pen
for writing commands, highly advanced programming to interpret
those commands and a wealth of options for communicating with
people and computers, from sending a fax to receiving computer
data over the airwaves. Many companies, including Apple, think
PDAs will be embraced by business executives who want to keep in
touch with their office computers and data.

Comdex will give most of the 140,000 or so show-goers their
first look at these information appliances with a handful of
technology and concept demonstrations.

HUGE CONSUMER MARKET

Almost everybody in the computer business remains convinced that a
huge consumer market is on the horizon for the devices,
especially when they become as cheap as VCRs and can tap into a
nationwide information network that offers everthing from
electron mail to the daily newspaper to video entertainment.
Proponents say the market is one that could dwarf the amazing
sucess of the personal computer age and reinvigorate the country's
lack luster high-tech business.

"There's lots of opportunity in this new world for American
technology to reinvent itself, and even to regain the lead in
consumer electronics," siad Robert Kavner, group executive of
communications products for American Telephone & Telegraph Co.,
which has invested in everything from the computer chips to the
software to the communications networks that are vital to the PDA
market.

Getting there, though, is proving far more challeging than
Apples's initial burst of enthusiasm would indicate.

The industry faces two chief obstacles to creating the new class
of product: confusion about why people would want it and the high
price tag.

                (panel)
*************************************
*    WHAT'S IN A NAME?		    *
* Confusion, when it comes to	    *
* tacking a sobriquet onto a 	    *
* new generation of portable	    *
* high-tech gadgets that will	    *
* combine some functions of	    *
* computers, cellular phones,	    *
* calculators, hand-held video	    *
* games and pocket organiz-	    *
* ers.  Different companies	    *
* and individuals have pro-	    *
* posed at least 11 names for	    *
* such gadgets, although the	    *
* most popular so far is Apple	    *
* Computer Inc.'s PDA desig-	    *
* nation:			    *
* 				    *
* o PCA: Personal Communication	    *
*   Assistant (Gerry Purdy, Data-   *
*   quest Inc. analyst)		    *
*				    *
* o PCC: Personal Companion	    *
*   Computer (Intel Corp.)	    *
*				    *
* o PCD: Personal Communica-	    *
*   tions Devices (Viewpoint	    *
*   Group)			    *
*				    *
* o PDA: Personal Digital Assistant *
*   (Apple Computer, Microsoft	    *
*   Corp.)			    *
*				    *
* o PIA: Personal Information Ap-   *
*   pliance (various)		    *
*				    *
* o PIP: Personal Information Pro-  *
*   cessor (Tandy Corp.)	    *
*				    *
* o PIT: Personal Information	    *
*   Technology (analysit Andrew	    *
*   Seybold)			    *
*				    *
* o PTC: Personal Telecomuni-	    *
*   cations Centers (Infocorp)	    *
*				    *
* o Personal Communicator (EO	    *
*   Corp.)			    *
*				    *
* o Picocomputer (Dick Shaffer,	    *
*   industry analyst)		    *
*				    *
*    3				    *
* o P : Personal Productivity Prod- *
*   uct (International Data Corp)   *
*************************************

PDA HARD TO DEFINE

Universal agreement about what constitutes a PDA isn't even
close. Most analysts believe that, to be atractive to consumers,
the devices must fit easily in a pocket; operate with a pen
instead of a keyboard; run for many hours, preferably days, on
one set of batteries; be able to communicate by cellular phone or
radio nearly anywhere the user might be; and be as easy to use as
a telephone or VCR.

At this early stage in the market, what companies can't seem to
agree on is just what application of PDAs will prove so crucial
to consumers that they will flock to buy them. As competitors try
to figure out what will consitute that so-called "killer"
application, some executives fear the resulting jumble of PDAs
will send such confusing signals that they will put consumers off
for years.

Analysts contend the problem has its roots in the practices of
the computer industry, which often simply takes the latest
available technology and tries to build something out of it,
without deciding ahead of time what customers might be willing to
buy.

"The computer industry builds products first and asks questions
later," said analyst Doug Kass of the Viewpoint Group in Aptos.

In the hotly contested consumer electronics market, by contrast,
buyers open their wallets only when they can see a product that
has some clear, well-defined purpose and a low price.

"If a PDA is a $700 calculator or a $700 phone book, I don't need
it," said Dick Shaffer, an industry analyst in New York.

PRODUCT'S PURPOSE UNCLEAR

Having too many functions also can be a deterrent to buyers, who
aren't sure what the product's main purpose is. Companies
themselves are so confused that they have come up with a dozen or
more names and acron7yms to describe the devices, from the
personal communicator moniker favored by AT&T and start-up EO
Inc. to palmtop computer to personal information appliance. Some
deliberately shy away from PDA because of Apples's apparent
flip-flop on Newton.

"I would not have had a problem settling on PDA (as a name), but
given what Sculley has done to it, I would't use it," said Howard
Elias, vice president of Tandy Computers, which is developing a
device with Japan's Casio Corp. that it now calls a personal
information processor. "He's confused everybody, including
himself, on what he means."

With Sculley backing away from the consumer angle for Newton,
some people have labeled his flashy introduction at the Consumer
Electronics Show a mistake.

"Some vendors believe Apple's hype has set the market back and
created expectations (among consumers) that can't be met,"
Henning said.

Apple maintained it did the right thing, even if it has changed
its message since.

"I would have labeled it a mistake if (Sculley's CES
presentation) had NOT achieved its objective of making people
understand the potential of the technology," said Burt Cummings,
director of marketing for Apples's Personal Interactive
Electronics division, which will produce Newton. "The response
since CES has be very, very positive."

'TOUGH CHALLENGES'

But he acknowledged that high outside expectations have "really
set some tough challenges for us."

One of those is the other major problem faced not only by Apple
but by every company hungrily eyeing the PDA market: The
technology to create a full-featured PDA is far too expensive
today to allow manufacturers to sell it for a price most
consumers would be willing to pay.

Sculley originally talked about Newton selling for less than
$1,000 -- the most common price analysts briefed by Apple cited
was $700. Even at that price, however, few consumers would buy
the product. Most popular consumer electronics products sell for
$100 to $400, the price at which products like VCRs and CD
players become best-sellers. Retailers refer to an over-$500
product as a "two-spouse decision," making it a much more
difficult product to sell.
		 
		 (picture insert)
		  BUILDING A PDA

 One reason consumers won't see a $750 PDA in
 consumer electronics stores anytime soon is that
 the cost of just the parts is far more than that
 figure. These are likely prices a company like
 Apple would pay for the components of a mythical
 PDA today, based on a composite of the figures
 from industry analysts and manufacturers:

		    Pen: $125
	    Pen-sensitive screen: $175
	       Expansion slot: $10
       Communication: $35 to $150 (wired);
	              $10 to $500 (wireless)
	  Case and power supply: $50-70
	 Storage, 20 megabytes: $300-600
     Microprocessor and "mother-board": $100
		Memory chips: $140
	     Software licenses: $100
	   ---------------------------
	  Minimum components total: $910
	      Apples's profit: $500
	    Manufacturer profit: $400
	      Retailer profit: $400
	       Total profit: $1,300
	   Probable list price: $2,600
	      "Street price": $2,200


Hewlett-Packard Co. of Palo Alto discovered the price barrier
when it was designing its HP 95LX, a calculator-size computer
with a miniature keyboard, a small screen and a built-in copy of
the Lotus 1-2-3 spreadsheet program. Many analysts consider the
popular $550 business product to be a precursor of full-function
PDAs, although it has no pen and no built-in communications.

MODEL SPARKED INTEREST

In 1989, the company showed a "concept" model of a PDA-like
device that had more features than the 95LX to a group of
consumers to gauge their reaction to it. Even though it was the
last of eight models the group saw during a two-hour session, it
sparked immediate interest, said Ken Henscheid, a Hewlett-Packard
executive involved in the project.

"People who had been nodding off literlily jumped up," he said.
Excited company officials asked the consumers what they would pay
for such a product.

"They said they'd be willing to spend as much as $100," Henscheid
recalled. "But we all knew that the technolgy cost much more than
that." Price, he added, is "probably THE fundamental barrier to
consumer acceptance of these devices."

Nearly all those involved now believe PDAs will be less of a
dramatic shift and more of a gradual movement to smaller and more
"personal" computers. The market will probably be peppered with a
wide variety of devices that have vastly different functions and
prices.

EO believes it can help develop the market by targeting traveling
executives with its new personal communicator -- essentially an
8-by-10-inch pen computer with a cellular telephone option --
with a starting price of $2,000. AT&T, which holds a stake in EO,
believes that the devices are compelling enough to jump-start the
industry -- and help U.S. companies dominate the new field.

WE HAVE THE TECHNOLOGY

"We have, from a competitive standpoint, a set of technologies
absolutely required to made this happen, like microprocessors,
software and communications networks," Kavner said. "And the
Japanese have some key technologies like flat-panel screens,
miniaturization in manufacturing and memory chips."

Kavner said personal communicators offer the United States a
chance to "trade hostages" with Japanese companies and bring all
the needed technology for PDAs onshore.

Apple, which still plans to unveil its first Newton in early 1993
-- although several reports indicate the product has run into
delays -- now says the product will sell to business users and
"early adopters" of technology.

"There's a tremendous response from institutions," Cummings said.
"But we wanted to get away form[sic] the word consumer: It has so
much meaning that it's almost meaningless. Everybody has their
own interpretations of it."

At the other end of the scale, Tandy plans to unveil an under
$500 "PIP" sometime next year, which it will sell to consumers.
But it is unlikely to include wireless communications options,
one of the most expensive parts of a PDA.

"We can do all the things people promise in these things," said
Tandy's Elias. "Just not in 1993 and not for $500."
			     - END-