Compaq developing palm-sized PC

The computer maker will later this year unveil a device based on Windows CE, a move that lends credibility to the struggling palm-size PC platform.

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Compaq Computer is developing a palm-size PC with a color display for release later this spring, sources say, a move that lends credibility to the struggling platform while raising questions about the PC giant's handheld strategy.

Compaq will unveil a palm-size PC based on the newest version of the Microsoft Windows CE operating system. Code-named Wyvern, the new devices are due this quarter, sources close to the company confirmed.

Although not Compaq's first Windows CE product, observers say that the company's support of the struggling palm-size PC is a vote of confidence for the platform's long-term chances for survival. Compaq will become the first major PC maker to release a palm-sized CE device.

"This is a boost to the palm-size PC," said Randy Giusto, an analyst at International Data Corporation.

Other major vendors are expected to sign on in the next couple of months, sources say. One possibility is Hewlett-Packard, which hosted a Wyvern preview at the Consumer Electronics Show in Las Vegas last month, and has introduced a color palm-size PC in China. HP currently markets a Jupiter-class device and an H/PC under the Journada brand name.

Compaq's palm-size PC is expected to use a stylus for inputting data and support the general handheld applications. Like the popular Philips Nino, Compaq's device is expected to feature four quick-start buttons for instantly launching specific applications, sources say. No word yet on expected pricing, but high-end palm-size PCs like the Nino currently go for $450.

The Compaq device will also offer a color display, unlike previous palm-size PCs. Microsoft's rival in the handheld space, Palm Computing, is also rumored to be hard at work on a PalmPilot with color display for release later this year.

Color displays mightily impact the cost, weight, size and battery life of any device, according to Giusto. "The color has to be very good for the big performance hit you take," he said, projecting that it will take at least two years before color devices appeal to the mass market.

Microsoft entered the space a little over a year ago, but has struggled to make dents in PalmPilot's overwhelming popularity. Microsoft's palm alternative garnered just 15 percent of the market last year, according to IDC. But that balance is projected to shift dramatically over the next few years, with Microsoft taking 55 percent of the market by 2002.

The market for handhelds in general is also expected to grow, according to a study released today from Cahners In-Stat Group, a technology market research firm. Almost half of all companies surveyed believe PalmPilot use will grow by 2000, and about one-third of survey participants believe that Windows CE devices will grow in popularity.

One key factor in Microsoft's favor is the sheer number of its manufacturing partners, analysts say, which will increase with the addition of a major PC manufacturer like Compaq. Less clear, however, is Compaq's handheld strategy, and why it is moving into the PDA market.

"Compaq has been playing in the H/PC, with an eye on Jupiter and palm-size PC," Giusto said. "But there's only been pockets of opportunity. There hasn't been a big volume play--big PC vendors are used to shipping thousands of units a quarter, and that's not the case with handhelds."

Compaq, which offers a half-VGA handheld PC based on Windows CE, announced support for Microsoft's Jupiter platform last October, but no product has materialized. Jupiter, also known as the H/PC Pro, is a larger device more closely resembling a mini-notebook in size and feel.

"A lot of vendors are waiting for revisions to the operating system, and to the Jupiter shell," before continuing product development, said Giusto. "There are some fundamental problems with performance and ease-of-use," he said, such as problematic synchronization between the device and desktop applications. "When you see some notable changes to Windows CE, expect to see [Compaq] and other majors come out with products."

Once those glitches are addressed, Giusto believes that more major manufacturers will begin supporting the platform, leading to increased developer support.

"When you have the interface improving, and developers saying it's a viable platform, then you have a groundswell. And with 10 vendors in the space there will be sheer outnumbering," of the PalmPilot, he said.