IBM hangs hopes on new ThinkPad laptops

That's the question hanging over the company as it completes the product road map for its notebook line and looks toward profitability for its PC division.

Armonk, N.Y.-based IBM next month will retire the ThinkPad 240 and 570 notebooks--two of its most popular ThinkPad models--and replace them with the ThinkPad X Series, as previously reported by CNET News.com.

The X Series completes an important transition started in May, when IBM replaced the ThinkPad 600 with the T--as in "thin and light"--series and the ThinkPad 390 and 770 with the A, or "all-in-one," series.

Until recently, IBM had been a relative bit player in the worldwide notebook market, according to market researcher Dataquest. Dell Computer, for example, led overall global notebook sales in the second quarter this year, with 21.5 percent market share, followed by Compaq at 16.6 percent and Toshiba with 13.4 percent. IBM came in fourth with 12.1 percent, with HP pulling up the rear at 5.8 percent share.

But since the May launch of A and T ThinkPad models, IBM has picked up momentum in the lucrative corporate market, the biggest buying segment. In July, IBM had 44.6 percent market share though corporate dealers selling to Fortune 500 companies, double that of second-ranked Toshiba, according to NPD Intelect.

With the X Series, IBM is trying to find the middle ground between the 240, a mini-notebook weighing 3 pounds and featuring a 10.4-inch TFT display, and the more portly 570, its 4-pound cousin packing a 13-inch screen and split-level design. For the lightest weight, the 570 snaps off a base containing the DVD drive and other options.

The X Series will come with a 12.1-inch display, 600-MHz Pentium III processor, 128MB of memory and 12GB hard drive and will weigh close to 3 pounds, said a source familiar with the portable. Like the 240 and 570, the X Series will be available in just a handful of configurations. Five 240 models and two 570 configurations are currently available.

Other sources familiar with the product said to expect the titanium-reinforced casing used in A and T series ThinkPads to appear in the X Series. The sturdy, lightweight material makes up the lid on A20 models and the T20's top and bottom covers. The material means IBM can bring in an all-in-one design with a 14.1-inch display at 6.4 pounds.

Because IBM is spotlighting portability in its marketing of the new systems, the company is expected to emphasize wireless computing more with X Series models than it did with other ThinkPads.

Like the A and T series, the ThinkPad X will feature a "portofino" port on the lid for snapping in Bluetooth wireless antennas and other peripherals, such as PC cameras. The ports allow people to connect peripheral devices, such as global positioning systems and MP3 players, to their notebooks.

Bluetooth, a wireless technology that lets smaller devices and peripherals automatically connect to each other, means people can connect to printers, Palm handhelds and other devices without cables or wires.

One feature the initial release of ThinkPad X portables won't have is Transmeta's Crusoe processor. During the PC Expo trade show, IBM showed off a ThinkPad prototype using the alternative to Intel and AMD processors.

Crusoe's appeal is that it runs cooler than competing processors and offers longer battery life because of the chip's lower voltage. In testing, IBM has squeezed eight hours of battery life out of Crusoe vs. about four hours for a ThinkPad 240 packing a 450-MHz Pentium III processor.

"This would be the kind of product the Transmeta chip would go into," ARS analyst Matt Sargent said. The chip is especially attractive for ultra-lightweight portables, he added.

For now, IBM customers will have to be satisfied with about four hours of battery life, comparable to the ThinkPad 240. A Crusoe-based ThinkPad X model is expected as early as the fourth quarter, but likely later, said a source familiar with IBM's product strategy.

IBM's bigger problem is launching the new model right in the middle of a supply crunch. Shortages of a single component used on ThinkPad and Netfinity server motherboards during the second quarter cost the computer manufacturer $250 million in lost sales.

Though the Netfinity crisis has abated on most models--the M3500 being an exception--ThinkPads are still fairly tough to find. Sources close to one distributor that asked not to be identified estimated that ThinkPad back orders are about 20 times those for Compaq Computer and Hewlett-Packard and eight times Toshiba's.

While this is a problem, Sargent didn't seem to think supply issues would ultimately hurt the X Series' introduction.

"You've seen from this last example that IBM will march on, in spite of the potentially unavailable product," he said. "That may not be the best thing for the customer short term. I think it could be argued--and properly so by IBM--that it's the best thing for the product line long term."

When IBM's PC division releases the ThinkPad X later next month, the company will complete a remake of all the PC products it sells and may achieve profitability for the first time in about two years.

The PC division, which lost $69 million in the second quarter, consistently has cut losses from a high of nearly $1 billion in 1998. But analysts are forecasting that the money-losing division could, at the least, break even during the third quarter.

"They're near the watermark in terms of profitability," International Data Corp. analyst Roger Kay said.

Much still depends on September sales and the effect of supply shortages, which some sources close to IBM speculated cost the PC division's return to profitability in the second quarter.

"I think it's positive that throughout the (PC) group they have done a makeover of the product line and their forecasts are positive," Technology Business Research analyst Bob Sutherland said. "For the year, I'm predicting the (PC) group will turn a profit."