With much fanfare,
on Thursday launched its new Tablet PC, a laptop with handwriting features that Chairman Bill Gates has ambitiously predicted would become the most popular type of personal computer in five years.
But before investors get caught up in the hype, they should realize that the Tablet PC is unlikely to fuel a huge jump in sales at the Redmond, Wash., behemoth anytime soon.
Microsoft clearly has high hopes for the product. The company has invested in the development of the Tablet PC for more than a decade and is reportedly spending $400 million to market it. At the launch in San Francisco, Bob McDowell, vice president of business productivity, said Microsoft executives have predicted that one-third to one-half of notebook PCs will be tablets within a year or two of launch.
But that might be a bit ambitious. "I'm sure they really believe that," said Michael Gartenberg, research director of client access and technologies at Jupiter Research. But "that sounds a little bit aggressive."
Microsoft does not disclose how much it is charging the approximately 12 hardware manufacturers for its operating system, but it's likely to be a premium over the standard XP operating system used by other laptops and desktop PCs because of the added features, Gartenberg said.
That means if a businessperson -- Microsoft's target market -- is considering buying a new laptop or Tablet PC, Microsoft gets revenue either way for its operating system, though probably slightly more for the Tablet PC.
Where Microsoft is really hoping to drive revenue, however, is from people who may not have bought a new laptop if not for the Tablet PC. The company is hoping to shorten the so-called adoption cycle of laptops, Gartenberg said. Microsoft wants the person who is generally satisfied with his old laptop to take a look at the Tablet PC and say, "Hey, I can do stuff I could never do before," and go out and buy one, Gartenberg said.
But is the Tablet PC compelling enough to prompt such action? In contrast to Microsoft's forecast that the tablet would be widely sold, Gartenberg predicted that its market for the next couple of years will primarily be early adopters. And while Gates said the launch of the Tablet PC marks an "exciting new era of mobile computing," Gartenberg called the tablet an "evolutionary product," albeit a "big leap in the evolutionary scale."
The Tablet PC, which is as light as three pounds, includes a digital pen for users to write by hand directly on a screen. It enables users to save notes in their own handwriting or convert them to typed text for input into other applications. Users will be able to add "digital ink" to a range of Windows applications, including programs developed by other software companies such as FranklinCovey and
Prices for Tablet PCs will vary according to manufacturer but generally range from $1,700 to $2,400. Gartenberg called that price range "extremely competitive" with the current costs of sub-notebook computers.
But it's considerably higher than other laptops. On Wednesday, Apple announced it would be discounting its laptops by $200 in advance of the holiday season, bringing the lowest price to $999.
Shares of Microsoft declined $1.19, or 2.1%, to $55.84 in recent trading.