October 23, 2003 6:56 AM PDT

Acer: Tablet PC fees hard to swallow

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Senior executives at Taiwan PC maker Acer took swipes at Microsoft during an event this week marking the first anniversary of the software giant's Tablet PC operating system.

Acer President Wang Chen-tang said Microsoft is charging too much for its Windows XP Tablet PC Edition operating system, which has resulted in disappointing tablet PC sales.

"Microsoft should put in more effort working with vendors in marketing tablet PCs," Wang said.

Sales of tablet PCs reached nearly 72,000 units worldwide in the fourth quarter of 2002--after the November 2002 launch of the Microsoft Tablet PC OS and tablet PCs from Hewlett-Packard, Acer, Toshiba and others.

Sales, however, have been falling ever since. Acer failed to achieve its target of having tablets take 20 percent of its overall notebook sales. HP and ViewSonic also indicated slow sales. Some companies have delayed product launches for several months, and it has taken almost a year for HP and Toshiba to introduce their second-generation models.

"The price difference is huge compared with regular notebooks. That's why tablet PCs have been challenged in the market," said Zhou Shih-hsiung, an analyst with market researcher MIC.

Acer sold 100,000 tablet PCs over the past year, amounting to only 5 percent of its overall notebook sales.

"The cost of a tablet PC is $200 (7,000 Taiwan dollars) more than its notebook counterpart. Of this difference, the hardware cost is only between $30 and $60. The majority of the difference comes from the OS license," said Wang. "We have tried to negotiate the fee with Microsoft several times in vain. It's very regrettable."

Another Acer representative asked that Microsoft drop its universal one-price policy and offer pioneer tablet PC makers such as Acer a break until the product becomes more mainstream.

"I hope the people in Redmond can hear us," Wang said.

Eunice Chiu, Microsoft Taiwan general manager, asserted that the cost of the OS was justified by the value of the pen-based computing it offered consumers.

"The license fees cover only a fraction of the overall amount spent developing the product," Chiu said, adding that Microsoft was satisfied with the launch of tablet PCs so far.

"We had 21 original equipment manufacturer (OEM) and original design manufacturer (ODM) partners in 2003, and this will increase to 34 in financial year 2004," said Chiu.

Not all of the 21 partners put out their tablet PCs on time in 2003, however, with some delaying the product launch, according to Li Chi-chao, Microsoft's vice general manager for OEM business.

Jen Wei Hung and Joseph Chen of CNET Taiwan reported from Taipei.

 

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