Tablets take their time

A new report says that after a little more than 18 months on the market, tablet PCs based on Microsoft's Windows XP Tablet PC Edition operating system have established themselves in several niches but have yet to catch on in the wider PC markets for businesses or consumers.

Tablet PCs have been adopted by companies in the health care, real estate and insurance industries, for example, but businesses have not yet deployed the pen-driven computers to executives or other workers in large numbers, and consumer sales also have been slow, according to a report released Wednesday by research company In-Stat/MDR.

Over time, some of the apparent lack of enthusiasm among businesses and consumers could change. However, tablet sales are likely to continue to be slow in those two markets until prices come down and the software improves--two things that are expected to begin happening later this year, according to the report.

Tablet PCs have done "pretty well in vertical markets, such as insurance or real estate, because those industries were used to the tablet form factor," said Brian O'Rourke, an analyst at In-Stat/MDR.

However, he added: "In the horizontal, broad corporate market, particularly large enterprises, levels of IT (information technology) spending are increasing slowly, if at all, and in that kind of environment IT managers are not going to go out on a limb and order a bunch of new form factor PCs. I'm not sure...those guys are convinced that the pen capability is enough of a value-add to justify the higher price of the tablet PC."

Many, including In-Stat/MDR's report, have concluded that lower prices, along with improvements in hardware and software features, will break down corporations' and consumers' apparent ambiguity toward tablets. But it will take some time.

"Tablet technology is progressing as expected, which is slowly," said Alan Promisel, an analyst with IDC. "Over time, there's going to be a greater number of convertible designs available at lower prices, making the (price) difference between a tablet and a traditional notebook almost negligible."

So far, sales numbers have been relatively small. IDC's figures show that worldwide, PC makers shipped about half a million tablets with Windows XP Tablet PC Edition during 2003, out of just less than 40 million notebooks shipped, Promisel said.

IBM thinks tablets could use more work as well. During a recent interview with CNET's News.com, Steve Ward, general manager of Big Blue's Personal Systems Group, described the current generation of tablet PCs, particularly convertible models, as being relatively heavy and low in battery life. IBM does not currently offer a tablet PC model, but Ward did not rule out eventually entering the market. A convertible tablet looks like a regular notebook but has a screen that can rotate and fold down to create a tablet writing surface.

"I think at some point in the future, tablets are going to be there," Ward said. "Personally, I do not think it is today's generation of tablets, and I think there are a number of changes that need to happen. We should talk again in 18 months. That's when I think the software will be ready--although some people are using it today--for the masses."

Tablet prices are expected to fall over the next few years, which could aid in their acceptance. The average selling price for a tablet is expected to slip below $2,000 for the first time this year, In-Stat/MDR's report says.

Meanwhile, Microsoft plans to improve its tablet software. Later this year, the software giant is expected to deliver Windows XP Tablet PC Edition 2005, an update that will improve handwriting recognition. Microsoft's Office 2003 includes more support for tablets as well.

New designs may also help the tablet PC. Gateway and Acer have already been selling convertible tablet models that incorporate larger, 14-inch screens, which are likely more appealing to executives, but tablet makers are expected to reveal additional models later this year as well.

Of all the groups that might embrace tablets, consumers are expected to take the longest, In-Stat/MDR's report says. North American consumers, for one, tend to purchase larger, "desktop replacement" notebook models, whereas tablets are comparatively small and more expensive.

There is potential for tablet PCs to become home computing devices over time, but so far little has been done to market them to consumers, O'Rourke said.

Instead, the next customers for tablets may be schools. Gateway announced on Wednesday that Winona State University, in Winona, Minn., plans to roll out 4,000 Gateway M275 convertible tablets to its students, faculty and staff.