Is the World Finally Ready for Tablet PCs?

Gates is betting big that they'll replace laptops

The history of technology is littered with cool ideas that never panned out. But few failures have been as abject as the tablet PC. A decade ago, such industry heavyweights as IBM (IBM ), NCR (NCR ), and Tandy (TBAC ), along with startups like Go Corp., plowed hundreds of millions into developing magazine-sized computers that could decipher handwriting. Back then, market research firm Dataquest Gartner even projected $10 billion in tablet sales by 1995.

Boy, were they ever wrong. The technology never worked very well, and the heavyweights never made a dime on tablets. Dataquest doesn't even forecast tablet sales these days. Meantime, small handhelds such as the Palm, which incorporate some of the early tablet technology, have become all the rage, developing into a $3 billion market.

As the saying goes, if at first you don't succeed, try again. On Mar. 26, Microsoft Corp. (MSFT ) Chairman William H. Gates III announced big plans to revive the full-size writing tablet. The software giant has inked deals with five big computer makers--Compaq (CPQ ), Toshiba, Sony (SNE ), Acer, and Fujitsu (FJTSY )--to launch, in 2002, what amounts to a newfangled laptop.

"ULTIMATE LAPTOP." Although it looks a bit like an Etch A Sketch, the device is far from a plaything. Nor is it an oversized handheld; Microsoft claims the tablet is nothing less than a full-featured computer. Indeed, Microsoft wants tablets--long a pet project of Gates--to one day replace the $57.5 billion laptop market. "It becomes the new portable in our view," he says. "It's the ultimate evolution of the laptop."

Whip it out at a meeting, and this PC becomes an electronic notepad that users can scrawl on or use to surf the Web. Plugged into its docking station, the tablet also works as a fully functioning PC, with all the processing power, memory, and storage of today's high-end laptops. And it will come with portable keyboards and a stand that will turn the writing surface into a traditional monitor. Of course, all that comes at a price: The 2.5-pound unit will run roughly the same as a high-end laptop, about $3,000.

The tablet may struggle to find a market. Users have long shied away from devices that promise to be all things to all people. "It's likely to be a compromised laptop and a compromised pen machine," says Jerry Kaplan, the founder of Go and a pioneer of tablet computing. He believes tablets failed ten years ago because resolution was poor, battery life was short, and there was no easy way to move handwritten notes to another device--not because users weren't willing to spend money on the gadget.

Gates & Co. contend they have remedied those problems, save one doozy. Although Microsoft has made some significant improvements in handwriting recognition, the company is reluctant to make that the key selling point. That's because handwriting-recognition software remains imperfect. Although the pen technology allows for speedier writing than a handheld, the software is still prone to errors translating handwriting into type. So Microsoft is selling the tablet as an easy way to store handwritten notes. "If you go to a lot of meetings, the tablet is going to be a great thing," says Bruce Kasrel, a senior analyst with Forrester Research Inc. in Cambridge, Mass.

Even if that's true, the new tablet faces another potential problem entirely beyond the control of Microsoft: bad timing. There's no way of knowing whether the economy will have rebounded when the devices hit the market. If corporate tech budgets remain tight, new gadgets could be a very tough sell.

To the naysayers, Gates says just wait. A few people will try it. Others will see it on planes or in coffeehouses and get jazzed. And the market will slowly blossom. "I have no doubt there is enough interest to seed that process and get that cycle going," Gates declares. He may be right eventually. But while this souped-up version may be a big improvement over its predecessors, it's not going to erase their ugly legacy overnight.

By Jay Greene in Seattle

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