Perspectives: Mobile computing: Married to the Mobile

The mobile PC market is growing apace, which should be good news for the reseller. But to pull in the profit, resellers have to push those peripherals, says Simon Meredith

The market for mobile PCs is growing faster than the desktop market, and this fact alone makes it important for the reseller community. Add to this the fact that, in the high-end and niche sectors, the most advanced products still carry a premium and it takes on added significance. Dealers make profits from portables.

Nick Eades, marketing manager of major PC brands at the IBM PC Company, says: ?People have accepted that if they want a mobile in the same category of performance as the desktop, they are going to have to pay a lot more for it. Besides, there are other things you can do with a notebook that you can?t do with the desktop, like mobile telephony.?

You can also take a notebook home, or to another site, or to a client?s office, or a hotel room. If it has the same power as the desktop, the portable has a great appeal.

Mobile PCs are, in one sense, much more of a dealer product than the desktop PC, according to Romtec senior analyst John Ses. He says that the proportion of notebooks sold through retail and by direct vendors is small. Even though a lot are bought through mail order, most still go through the channel.

?The main reason is that the direct vendors mostly build to order. It is quite easy to do that with a desktop, but not with a notebook,? says Ses.

What?s more, users are willing to pay more for a top-of-the-range mobile PC than they will for an executive desktop. IBM?s best-seller is its top-of-the-range Thinkpad 720, which has a list price that starts at about #4,200.

This is close to #2,000 more than a comparable desktop and thus means a lot more profit to the reseller, even if sold in small quantities. People don?t quibble about the price at the high end of the market, says Eades. That only happens at the lower end where margins are thin and to make money, resellers have to find unbadged products that are cheap but also do the trick.

There are plenty such products around and the difference in price is startling ? half or less of the equivalent Toshiba or IBM notebook. They claim a reasonable share of the market as a result but there seems to be a fairly good balance now between the branded products and the unbranded.

According to Eades, about 60 per cent of the market falls into the #1,500 to #3,000 bracket and about 40 per cent of this sector is corporate business. The rest is the more price-sensitive medium enterprise and some of this sector ultimately goes to the Far Eastern branded and vanilla product brought into the country by the likes of Acer, Mitac, Aashima, and Enta.

The remaining 40 per cent of the market is split evenly between the higher corporate market and the lower small business market, with branded products selling to the large firms and unbranded models to those on lower budgets. It is a healthy market across the board.

But next year, the buoyancy could be upset, says Ses. Intel is not expected to produce a low-power version of the Pentium Pro until the end of 1998 and in the meantime, a big performance gap will open up bet- ween the desktop and portable.

Ses says AMD and Cyrix might try to take advantage and release a low-powered processor ahead of Intel. But there is no indication that either of these companies will attempt to bridge the gap.

AMD marketing manager Richard Baker says the company could release a low-powered product if it feels the conditions are right. The K6 has low-power technology built in and would be much easier to convert for use in the portable market than the Pentium Pro which has, as Baker put it, ?a heat-sink like a Victorian fireplace?.

Cyrix is playing its cards close to its chest with the M2 processor range, but the chances are that this product won?t appear in a low-power version before Pentium Pro. For both AMD and Cyrix there would need to be the assurance of a solid customer base, a major purchaser of chips with a firm commitment to make the development work worthwhile.

Since Toshiba, Compaq, IBM and Dell control, between them, about 70 per cent of the mobile PC market, and are all closely aligned to Intel, it seems unlikely that there will be a low power Pentium Pro or equivalent much before 1999.

With or without the Pentium Pro, there is still plenty of growth in the mobile market. Ses says that the increase in teleworking and location independent working is one factor, and the power of notebooks being comparable to the desktop is another.

While this aspect of the mobile PC?s appeal may be eroded over the next few months, there are other factors that are certain to keep the ball rolling ? longer life batteries and larger colour screens with higher resolutions.

Vendors don?t see the processor gap inhibiting the market anyway. Eades says: ?I don?t think it?s a problem. MMX Pentium is coming through, but in my experience the fact that the CPU lags behind the desktop is not an issue ? the difficulty is not power, it?s battery life. People want a smaller, lighter battery.?

Robin Shuff, PC product marketing manager at Digital, agrees. ?I don?t see the performance as a limiting factor. If there is one it?s battery life. We?d all love a notebook that would run for eight hours a day and that?s the big barrier to notebooks simply taking off everywhere,? he says.

Shuff says there are two distinct sectors in the market: the value end and extreme portability. At the lower end, he says, customers want as many features as possible for the lowest possible price. No one argues with this statement ? there is a distinct value market but many users will take to the pages of the direct-seller magazines in search of the product they want.

Eades says that this is good, profitable business for the off-the-page resellers because notebooks hold their prices so well. But this is all well and good for businesses with low cost structures. Traditional dealers have to make more money to support their operations and Eades believes that they can if they make the effort.

?I don?t think resellers are selling enough peripherals on them first time around. You can sell an IBM machine and make a good profit but there?s no comfort zone.?

Dealers often miss out on the docking station opportunity, says Eades. Magazines have stopped reviewing docking stations and the perception is that no one uses them any more. But while the idea has not caught on in the SME sector, Eades claims it has stuck in the corporate market. He estimates that 60 per cent of corporate notebooks have corresponding docking stations.

Vendors need to help resellers make more out of the sale, he says, and IBM is trying with a number of add-on products. ?Dealers hate something that is hard to sell and hard to support,? says Eades. ?Our job is to make it easier.?

This, however, is the story that many dealers will have heard over the years from Compaq, Toshiba and IBM. Often the products are rebadged add-ons and sell for an over-the-odds price.

There is no shortage of add-on products on the market. Networking adaptors and fax/modem cards, particularly PCMCIA/PC card format products, have been immensely popular over the past few years and new areas such as GSM mobile data, wireless networking and high-speed networking are starting to generate new opportunities.

Security is also an increasingly important factor on the notebook. Shuff says that Digital has been receiving a lot of enquiries about using Windows NT on its laptops and he puts this down to security concerns.

NT will allow numerous different log-ins and will make specific system resources available to that user, thus protecting other user?s files and programs.

But it may be that users simply like NT and want to use it for themselves. Gartner Group figures say that the product is more cost-efficient in use than Windows 95 and this may be influencing portable users.

Even so, says John Nolan, MD of portable add-ons specialist PPCP, security is a concern for the portable user. ?Portable PCs are vulnerable, they get stolen and there? a need for protection,? he says.

PPCP has started to sell security products that provide password encoding and key-device access, as well as encryption facilities. Nolan says that not all users are impressed by the products, but many are and this could be a useful additional service resellers can provide and a useful source of additional income as well.

One development that might spark off more add-on product sales is the arrival of the Windows CE pocket PC. In Q3 this year, we should start to see products from all the major seven CE licensees (NEC/ Packard Bell, Hewlett Packard, Compaq, Philips, Casio, LG and Hitachi) appear. Vendors are optimistic about the pocket PC?s chances of success.

Microsoft is enthusiastic about Windows CE, but is anxious to stress that it is not just for PCs. It might end up in set-top boxes and, within six months, is also likely to turn up in hybrid GSM phones/pocket PCs. David Weeks, Windows 95 product manager at Microsoft, says it has attracted a lot of interest and believes it will create opportunities for resellers.

?Dealers will be able to sell add-on packages for CE. The developers kit is already available and you?ll have people writing add-ons for the system, for example, mapping systems for fleet management teams, and dealers will be able to sell these solutions on to users.?

Some CE applications are already out in the US, but it may be at least six months until we see software that is designed for use in the UK. And applications will tend to be vertical. Windows CE may present opportunities for resellers with a specific market focus and for some corporate dealers.

Weeks, and other proponents of CE, say that interest from corporate users has been high. Indeed the infamous gas board project will, apparently, use 6,000 pocket PCs running CE but with a customised touch screen. David Matthews, senior product marketing manager at Compaq, also sees strong interest from the corporate sector.

?Pocket PCs have not been all that successful in the past but I don?t think it?s worth looking at the past here, you?ve got to look to the future and we are being told by our resellers and our corporate customers that this is something they want.?

What appeals to the corporate, says Matthews is the availability of the standard Microsoft applications in the pocket-sized machine with built-in electronic communications and a long battery life.

Nick Rogers, general manager at Hitachi, a late addition to the gang of seven licensees, also thinks this is the CE machine?s main appeal. ?They will be used in vertical applications, but Microsoft is trying hard to position it as a peripheral. If I was going to use it as a standalone I?d buy a Casio or something, but if I need Word or Excel, then Iook at the CE product. As a PC user, you?ve got to ask yourself, which one would you buy??

The obvious answer is the CE product ? after all, why not have it if it is available and it is easy to move files between the desktop and the pocket PC?

The likely nature of the CE market is that applications may be large, but they may also be specialised and require custom manufacturing or coding. The rewards may be high, but the investment will also be considerable. The CE market then, may be limited unless you have these skills and resources.

Shuff is dismissive of the pocket PC idea. The keyboard needs to be big enough for users to do serious typing on, he says. Digital is not one of those vendors which has licensed Windows CE.

Whether CE is a success or not, the market for notebook PCs looks set fair for some time to come. There is still a need to increase battery life, improve screen resolution and reduce weight.

But as these technologies are developed and the processor life cycle rolls on, we can expect the mobile market to be a good one for dealers who are prepared to take the opportunities. We just need to try a bit harder with the peripheral sales.