NOTEBOOKS - Come fly with me

Practical, portable and easy on the pocket - notebooks are coming to life, hatching out of their shell and threatening to overtake desktops in the pecking order of PCs.

The mobile computer, to paraphrase Dr Johnson, used to be like a dog life, hatching out of their shell and threatening to overtake desktops in the pecking order of PCs. walking on its hind legs. It was clumsy and it fell over a lot, but it was amazing to think that it could be done at all. When manufacturers managed to squeeze all the necessary components of a PC into a box no larger than a portable sewing machine, the crowd gasped. When they shoe-horned them into a slab that would just about fit in a briefcase, the crowd cheered. When they equipped the slab with a colour screen, CD-Rom drive and a funny little pointy stick instead of a mouse, the crowd nearly fainted with excitement.

Now users can buy a fully functioned sub-notebook PC, little bigger than an A5 sheet of paper, or a perfectly reasonable A4 notebook with a 400MHz Pentium II, DVD-Rom drive and enough disk and memory space to run a reasonable sized network for less than £1,000. There are notebooks available to suit almost every kind of business user and almost every kind of pocket.

The notebook market is buoyant. It's growing twice as fast as desktop sales - 19 per cent last year in the UK, according to research firm IDC - a trend which could soon become even more marked, as desktop sales start to peak, while those of notebooks continue to rise. Notebook sales are starting to cannibalise those of low-end desktops, and are no longer seen as specialist products to be sold only by specialist sales forces.

Notebooks are well and truly entrenched in the mainstream and are destined to become even more so. 'We're going to see a shift from desktops to notebooks - the only question is when it is going to happen,' says Andy Brown, a PC research analyst at IDC. 'The technology gap is closing, as processors are available in notebooks not so long after desktops. Notebooks are becoming more robust, they're smaller and lighter, and prices are dropping.'

Price pressures are so strong that Hewlett Packard, one of the top four notebook vendors, has been forced to contract-out the manufacturing of its low-end machines to remain competitive. Yet, across the board, notebooks remain about 30 per cent more expensive than their desktop cousins - a figure which has remained unchanged for years.

What is really driving notebook sales is not falling prices, or even key advances in technology - of which there have been precious few in the past couple of years - it is the change in working patterns and the increased competitiveness of the business world.

'The world is getting ever more mobile,' says Con Mallon, marketing manager at Toshiba, still the world's leading notebook manufacturer. 'People have got into the psychology and working patterns of having a PC-type device available for a longer part of the day.'

This is bad news for the corporate wage-slave, who may now be expected to beaver away on the train or in front of the television at home. But it's good news for notebooks vendors and dealers, because it's expanding the market and extending the use of portables down the organisation. Instead of being an executive toy, notebooks are being issued to people such as sales staff, middle managers and field service engineers.

'Because of the type of technology you can get, and because it encourages homeworking and not wasting time while commuting, corporates are finding they get more work out of people if they carry a notebook,' says Katharine Sharp, brand manager for IBM's ThinkPad notebook range.

Hot-desking - providing a limited amount of office space which is shared by staff when they happen to be in the building, rather than giving everyone their own desk and potted palm - is also becoming more popular, as increasing numbers of staff telework and office rents rise. Banks and telecommunication companies already do quite a lot of it, and notebooks can be ideal in this situation.

First-time corporate buyers are becoming rarer, as more notebooks are sold as replacements for older portables. This is making customers much more canny about what they are buying. 'Customers now tend to be second-time buyers,' says Richard Walters, notebooks marketing manager at Panasonic. 'They've had a standard plastic notebook, they've suffered screen and disk failures, and now they want something more reliable.'

The SME market for notebooks is blossoming. A lot of professional people, such as consultants and independent financial advisers, are setting up their own businesses, and want the same kind of computing facilities - including portables - that they enjoyed when they were employed. Owner-managers also appreciate being able to take their office PC home with them to catch up on some paperwork.

Business users rarely have notebooks as second machines. Toshiba estimates that in 80 per cent of cases, the notebook is the user's only PC. This is starting to eat into desktop sales. Sarah Green, marketing manager at Elstree reseller Powermark, says: 'Because prices have come down, the computing power is there and peripherals are becoming more uniform. We're finding that customers who used to buy desktops for people are now prepared to buy portables instead.'

Other sectors, such as consumer and education, have yet to embrace portable PCs in significant numbers. The price premium and lack of multimedia features are still discouraging consumers, though the more adventurous may start buying notebooks for space saving reasons, especially if they are families who already have a desktop PC and are buying a second or third machine.

Education sales are beginning to pick up, with some independent schools issuing notebook PCs to their pupils and teachers, but they remain too expensive for the majority of state schools.

One of the main issues for business buyers is cost of ownership which, according to Gartner Group, can be 58 per cent higher than for a desktop PC. Part of the problem is the time taken to evaluate and launch notebooks, which may be out of date before users receive them because of the incredibly short shelf life of portable products.

'People are coming to us and saying they're sick to death of rapid product cycles, which have been as short as three to six months,' says Paul Craddock, business manager for HP's OmniBook range. So HP has now committed to shelf lives of between nine and 12 months for models in its 900 and 4150 corporate notebook ranges, and at least 18 months for peripheral devices such as docking stations.

Consistency and commonality within product ranges is another issue. Compaq, another top four manufacturer, has ensured that its newest models can still use docking stations sold in 1997, as well as reducing the number of peripherals such as CD-Roms, backup devices and Ram chips. User upgrades of components such as storage devices and memory chips also helps reduce the support burden on central IT departments.

Standardisation is key. 'Customers are concerned about having a standard platform for their corporate base,' says Green. 'This includes total cost of ownership, the Intel roadmap, the lifespan of the product and having access to a range of products to suit the needs of their different employees.'

The main notebook manufacturers - the likes of Toshiba, Compaq, HP and IBM - therefore produce several ranges of notebooks, which correspond to three or four distinctive segments of the market: power users, corporate mainstream, ultra-portable and budget (see box below).

Slimline and sub-notebook machines - with footprints of anything from A5 to just under A4, and often less than an inch thick - are becoming increasingly popular, such as the Sony Vaio, Fujitsu Biblo, Toshiba Portege, IBM i Series and ThinkPad 570 and 240, Compaq 650 and Dell Latitude LT.

Chip makers are trying to reduce the time lag between processors becoming available for the desktop and portable markets. Intel recently introduced a 400MHz Pentium II for portables, and expects to launch a portable Pentium III in the autumn. AMD and Intel Celeron chips have helped reduced costs at the bargain end of the notebook market.

Otherwise, the technical front remains fairly quiet. This is because the main innovations have already been made. Components have been miniaturised far enough that the size of a portable computer is dictated more by the interface the user wants than by its processing power. Full-sized notebooks remain the size of a telephone directory because their users want large screens and keyboards on which they can touch type.

TFT screens are available in 13.3 and 14.1in, which are about the maximum possible unless the user is prepared to put up with an outsized notebook and have a 15in display. XGA resolution has nearly caught up with SVGA, according to research firm Context. TFTs are in short supply at present, preventing prices from falling further.

Modems, usually 56k, are included in all but the cheapest notebooks from the main manufacturers, with USB connectivity, DVD drives and digital video becoming more common. Disk drives can be as high-capacity as desktop models, with sizes up to 14Gb available. 3D graphics are common even on mid-price notebooks. The only area which is lagging is battery technology, with few notebooks able to work constantly all day on a single charge.

Lithium ion is about as good as it gets at present, though lithium polymer - which can be made into any shape to fit the space - could be on the market by next year.

Security remains a big concern for portable users - not surprising since portable computers are so attractive to thieves, and vendors such as HP are offering theft insurance alongside their worldwide breakdown warranties.

To ensure that the data is safeguarded, even if the machine is stolen, smartcard-based encryption systems are also being introduced. Compaq's Aero 8000 has a built-in smartcard reader, while HP supplies its Encryption Smartcard Security System as an optional extra for about £175.

For the reseller, notebooks should no longer be regarded as specialist products. 'The skills required to sell a desktop PC can also be used to sell a portable, much more so than three or four years ago,' says David Matthews, group product manager for client products at Compaq.

Hardware margins are only slightly less derisory on notebooks than on desktop PCs - although HP says the OmniBook is its highest margin range at present. But higher unit prices mean cash margins are a bit more healthy, and the value-added opportunities are much better. 'There's definitely a potential for resellers to do well in the portable market, because it's a true service and value-added systems sell,' says Mallon. 'The technology still needs some explanation. How do customers move from desktop technology to a more portable, accessible technology?'

Craddock says: 'There's slightly more margin in the hardware, but we have support packages and insurance which are margin enhancers and all the accessories such as carry cases, extra disk drives, Ram upgrades and PC cards.'

Many portables tend to be sold as part of an application system, for example, for field service engineers or sales forces. As well as the original application bundle, consultancy and training, there is plenty of scope to provide service and support, with telephone hot lines, hot-swapping of components and machine replacement - mobile users rely on their PCs, and being isolated, they are more vulnerable to hardware problems and support issues than office-based workers.

Although modems are routinely built into notebooks, the improving quality of notebook screens and keyboards means that few people now buy separate desktop monitors or input devices - portable PCs still seem to demand a wider range of bits and pieces than desktops. There are PC cards for connecting to Lans, drives for floppy disks, Zip disks, CD-Roms and DVDs, plus an emerging market in tape drives and write-once media like CD-R for taking backups.

In addition there are carry cases, spare batteries and chargers, car adaptors - including ones which conform to the Empower standard and can also be used on aeroplanes and in airport departure lounges - and peripherals such as printers, scanners and digital cameras. Most attract higher margins than the notebook computers themselves.

Coming soon: look out for a feature on the future of notebooks and of portable computing and communications technologies, plus the increasing role of handheld and Windows CE-based devices.

WHAT TYPE OF CUSTOMERS DO YOU ATTRACT?

Manufacturers generally divide the notebook PC market into three or four segments, depending on the users and their requirements.

Mobile office notebooks are desktop replacements, typically weighing in at 5-6lbs, with Celeron, MMX or Pentium II processors, 13in TFT displays, 64Mb of Ram and 4-6Gb hard disks. Mid-range Pentium II machines in this category cost from £1,600. Most popular are general-purpose machines, such as Toshiba's Satellite 4060, Compaq's Armada 740, Hewlett Packard's OmniBook 4150 and IBM's ThinkPad 600.

Bargain buyers want a complete package - for convenience as well as cheapness - so low-end notebooks tend to come with floppy drives, CD-Rom drives and built-in modem. Aimed at small businesses, corporate executives, and sometimes students and consumers, these machines are best suited to simpler tasks like word processing and email. They tend to be heavier than their 'mobile office' counterparts, at 7lbs, and bulkier. Celeron-based machines with STN displays cost as little as £1,000. Popular entry-level models include Toshiba's Satellite 4030, Compaq's Armada 1500, IBM's ThinkPad 390 and HP's OmniBook XE2.

Power user notebooks feature the latest Pentium II chips - now up to 400MHz - TFT displays of 14 or 15in, big hard disks and Ram up to 128Mb, plus goodies like DVD-Rom drives and MPEG II decoders. They are not light, weighing in at 6-8lbs, and costing £3,000 or more for the highest specifications, puts them more in to the niche product category. Users tend to be serious number-crunchers, multimedia developers, and anyone who is bored with their Rolls Royce. Top-flight notebooks include Toshiba's Tecra series, Compaq's Armada 7800 and IBM's ThinkPad 770.

Aeroplane warrior notebooks are for people who regularly use their machine while on the move. Lightweight machines like Toshiba's Portege, Compaq's Armada 3500, IBM's ThinkPad 570 and HP's OmniBook 900 are thinner than standard notebooks - often less than an inch thick - and weigh about 4lbs. Super-portables may lack internal CD-Rom or floppy-disk drives, but their technical spec. is as high as a 'mobile office' machine. The smallest full-function Windows 98 PC, Toshiba's veteran Libretto 70CT, is the size of a video cassette and weighs less than 2lbs.