August 30, 2004 11:41 AM PDT

Will XP update give tablets a boost?

After nearly two years on the market, makers of tablet PCs based on Windows XP Tablet PC Edition have yet to prove that the pen is mightier than the keyboard.

But manufacturers are hopeful that Tablet PC Edition 2005, a new version of the operating system unveiled last week, will mark a turning point by making tablets easier to use.

Tablets are laptop-like portable computers that allow people to jot down notes using a pen and a touch-sensitive screen. They can convert handwriting into typed text and sketches into image files. But sales of devices based on Windows XP Tablet PC Edition have been lukewarm since the introduction of the operating system in November 2002.

Still, tablets have established footholds in several areas, including health care and insurance, and are gaining favor in the education sector, especially among colleges and universities. That interest led to shipment of about 440,000 XP-based units in 2003, according to Gartner. The research company expects shipments to continue to grow gradually, increasing to about 600,000 units in 2004 and about 900,000 in 2005.

"We're seeing slow and steady growth" so far, said Leslie Fiering, an analyst with Gartner.

The Tablet PC Edition 2005 update, which will make its way onto existing tablets as part of the company's Windows XP Service Pack 2 and will begin shipping on new tablets this year, takes several steps toward making tablets easier to use, she said.

The update improves handwriting recognition by adding speed and accuracy in converting handwriting to typed text. It's also smarter about data that's being penned into forms, as well as Internet and e-mail addresses, thanks to the addition of contextual rules that allow the tablet to discern the type of data that's being entered, according to Microsoft.

The updates offer enough of a step forward that executives at several companies that make tablets, including Hewlett-Packard, Motion Computing and Toshiba, all said that they believe tablets could gain broader appeal and bring back some potential customers for another look.

Those who evaluated an XP-based tablet before "should consider it (again) now, because of Service Pack 2," said Mark Baerenstecher, worldwide product manager for tablets at Hewlett-Packard. "It deserves a second look because it does see some improvements."

Not everyone, however, is counting on the update to boost shipments.

"I think (Service Pack 2) will help in that it will drive awareness," said Paul Torres, product manager for tablets at Gateway. "We don't expect to see a huge bump (in sales) from Service Pack 2, in general, but we are definitely going to ride the marketing" done by Microsoft.

Instead, Gateway is eyeing colleges and universities as a new market for its tablet, the Gateway M275. The Gateway machine, like other so-called convertible tablets, looks like a traditional notebook, but its screen can rotate 180 degrees and fold down to create a tablet-like writing surface.

One university, Winona State University, in Winona, Minn., is issuing about 4,000 Gateway tablets to students and faculty this year.

Joe Whetstone, vice president of IT at Winona State, said evaluations conducted by students and faculty showed that students favor the convertible tablet for taking notes in class, and faculty members believe they could use tablets to craft new ways to teach, such as collecting their own tablet-written notes and diagrams and posting them online for students. Thus the college started giving away tablets to freshmen over the summer.

"Overall, I'd say we've had a very good experience" so far, Whetstone said. "I think education is going to be the biggest use (for Windows XP tablets). In taking notes--anywhere you have a lot of diagrams--it's fantastic."

The devices are more successful than their predecessors--tablets created by a handful of companies such as Fujitsu that used specialized software to make Windows work with a pen. Still, the machines have thus far failed to win over large numbers of mainstream computer users. Although shipments of XP-based tablets are expected to grow--Gartner predicts that shipments could reach 4 million in 2007--the numbers may not grow to constitute a huge part of the overall notebook market until manufacturers are able to sell them at lower prices and third-party applications are available in greater numbers, Fiering said.

Indeed, even if XP-based tablet shipments reach 4 million units in 2007, they'll account for less than 6 percent of overall notebook shipments, according to Gartner.

Time will bring improvement. XP-based tablets, which tend to cost at least a few hundred dollars more than a similarly configured notebook, should come down in price as costs decline for specialized components, including the digitizers that capture pen input and the special hinges used to create convertibles.

Right now, Gateway's most basic M275 tablet comes with a 14.1-inch screen and a 1.5GHz Intel Pentium M processor for $1,799. It costs about $500 more than a Gateway M320 notebook with the same basic features and a 15-inch screen. Over time, Gateway would like to close that gap so the difference is down to $100 or less, Torres said.

But Microsoft could also do even more to boost tablets by adding more pen capabilities to Windows, Fiering said.

Longhorn, the next version of Windows, is expected to do more to embrace the pen. Microsoft has discussed adding several new tablet features to Longhorn, including one known as "Flick" that would allow the pen to deliver complex commands based on various gestures as opposed to just using it to move the cursor on the screen.

Longhorn isn't expected until 2006. Until then, improvements will include new tablet models from manufacturers such as Gateway and also increasing numbers of third-party software applications.

 

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