October 6, 1999 7:25 PM PDT

Philips pulls the plug on Nino handheld

Philips Electronics is discontinuing its Nino line of Windows CE-based handheld computers, another setback in Microsoft's battle to usurp the Palm Computing throne.

After selling its remaining Nino 500 and 200 handheld PCs, Philips will exit the market for the Microsoft-based handhelds, the company said. Instead, it will refocus its resources on developing voice and data products, such as "smart" cell phones.

Nino never gained much of a following, even among devices running Windows CE, Microsoft's scaled-down operating system. But Philips's decision to pull the plug on the product indicates the larger turmoil among Microsoft's Windows CE hardware partners, which have largely been stymied in their attempts to break Palm Computing's grip on the handheld market.

"The market for handhelds, and in particular the stand-alone [Windows CE] palm-size PC, was smaller than Philips expected," said Marty Gordon, a spokesman for Philips Electronics, adding that the company will "continue to sell the Nino through the current life cycle until we sell out."

Although handhelds like Palm Computing's PalmPilot and the Nino once were considered a niche market appealing only to hardcore techies, the devices have gained mass-market attention as the PC industry looks for new convenient methods of accessing the Internet and information services.

Despite the growing interest, Philips's history in the Windows CE market has been marked by fits and starts: In early 1998, Philips introduced the Nino and the Velo, which was a larger Windows CE handheld in a clamshell design. Philips discontinued the Velo device shortly after it was introduced.

The company's ambivalence about its Windows CE handheld business became even more apparent when Philips declined to offer a so-called Jupiter device, which was Microsoft's vision of a sub-notebook based on the Windows CE operating system.

The Nino never really took hold, according to analysts. Among worldwide handheld makers, Philips ranked fifth both in 1997 and 1998, according to market research firm Dataquest. Philips's handhelds accounted for 2.9 percent of global hardware sales in 1997, Dataquest found, rising only to 4.4 percent in 1998. 3Com's Palm Computing, by comparison, accounted for more than 40 percent of the market in 1998.

Nino was dogged by sloppy design and its association with Windows CE, some critics have said. Customers have complained that Windows CE is difficult to use and synchronize with other devices, issues Microsoft is trying to fix.

"The volume just isn't quite there at this stage," said Diana Hwang, a handheld analyst with International Data Corporation. "Philips has never been able to capture either the consumer market or the enterprise market, and CE is taking a lot longer than expected to takeoff."

For its part, Microsoft disputed the notion that problems with the operating system contributed to Nino's demise. Brian Shafer, a Windows CE product manager, said: "Some of the manufacturers may or may not be as successful as others, given their brand or channel strategy. There's a whole host of other factors which come into play."

In fact, Shafer looked on the bright side, pointing to the popularity of Casio's Cassiopeia devices and predicting that the shakeout may benefit remaining manufacturers such as Hewlett-Packard and Compaq Computer, which both recently announced new devices.

"Obviously, we'd like Philips to remain shipping equipment, but it's not something that we necessarily view as bad," Shafer said.

Philips will continue to work with Microsoft on its WebTV set-top computer and TV Pak enhanced television software package, the companies said.

Gordon declined to specify how much longer the Nino will be available and did not rule out price cuts in the near future, which typically happens with discontinued products.

Philips has been contacting its retail and software partners, Gordon said, although many business partners contacted appeared surprised at the news.

"As far as I know, nothing has changed in our contract," said a representative from Audible, which bundles a digital audio player with the Nino. "We have not been informed from anyone that anything has changed."

 

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