Compaq shipping new handheld

Compaq is hoping its new device, based on Microsoft's newest version of its Windows CE operating system, will stand out from a crowded field of competitors.

At this point, there are more than 12 manufacturers of Windows CE devices, drawing about 25 percent of all handheld sales, according to market research firm International Data Corporation.

In the next few years, Microsoft and its legions of manufacturing partners are projected to flood the market with CE-based devices, but for now, the multitudes of vendors admit they must resolve a number of problems before making a serious dent in 3Com's PalmPilot sales.

Manufacturers and users have reportedly complained about problems with the operating system, including glitches with desktop synchronization. Microsoft-based devices from relatively unknown companies like Everex have also had a hard time going up against the established Palm brand.

"I don't think [Casio's] Cassiopeia is a household name. I don't think it's ever going to be a household name," said Palm's outgoing president and 3Com's vice president of business development, Janice Roberts, in a recent interview. "I firmly believe that we're the only handheld business making money--and we are making money."

Palm-size PCs historically cost up to $200 more than most PalmPilots, but Compaq's $449 Aero 2100 has the exact same price as Palm's newest high end device, the Palm V. And unlike the new Palm V and Palm IIIx, the Aero 2100 offers a color display.

Handhelds are "a huge market that's just exploding, and we're really looking to take advantage of that," said Ben Williams, director of marketing for Compaq's handheld group. Williams attributes Compaq decision to wait for the third revision of the Windows CE operating system to the platform's new support for color displays.

He also cited the long battery life, ergonomic design, and high-quality audio as important advancements in the platform since its launch a year ago.

The Aero 2100 will feature a reflective 256 color display, 8MB of memory, 4 customizable launch buttons, left-hand scroll bar, voice recording with integrated microphone and speaker, and lithium ion battery capable of 10 hours of battery life.

Compaq has also teamed up with Audible to provide audio content for consumers from the Wall Street Journal and the New York Times, although the Aero 2100's audio is not yet stereo quality, according to Williams. "Sound is an area for improvement," he said.

Compaq, which already markets a clam-shell handheld PC, is expected to expand its Windows CE line later this spring with the Aero 8000, slightly smaller than a notebook with a larger keyboard than its existing H/PC. The Jupiter-class Aero 8000 may include a 128-MHz processor and 32MB of memory, according to one source.

"We're in the process of looking at all three [Windows CE] categories," said Williams, referring to the palm-size, clamshell, and handheld professional class products. Williams would not confirm that Compaq will definitely release a sub-notebook or "Jupiter" Windows CE device. "We're looking very hard at the h/pc pro devices to determine what customers really want."

Marketing all three product categories does present a dilemma, Williams conceded, especially in the case of the smaller clamshell device. "We are very well aware our entire industry hasn't done a good job of communicating these three devices and where to use what, when," he said. "We need to be very simple and very clear on the functionality of each device."

Compaq will leverage its desktop and notebook PC strengths in marketing the new palm-size PCs, possibly including bundling deals, he said. "A lot of customers want to purchase from one vendor and have one point of accountability."

Compaq's expansion of its Windows CE product line is expected to be followed by Hewlett-Packard's entry into the U.S. palm-size PC market later this spring, sources say.