PC makers look beyond the beige box

LAS VEGAS -- Personal computers that come in the form of a large beige box are an endangered species.

Or so believe a lot of the industry executives crowding Comdex/Fall '99 this week.

Indeed, PC makers, chip sellers and even Microsoft Corp. (Nasdaq: MSFT) -- whose Windows operating systems will be found on the majority of the some 120 million PCs that will be sold this year -- agree it's time to move past the boring old PC.

Analysts say this signals nothing less than a tectonic shift that will force big computer makers to develop approaches that focus on more than their bread-and-butter PC businesses to include appliances and the delivery of new content to consumers at home and at work.

The objective isn't so much getting rid of the PC as finding a way to complement the PC. No easy trick. For Compaq Computer Corp., moving past the beige box starts with the removal of "legacy" hardware from new PCs.

Earlier this month, for example, Compaq (NYSE: CPQ) introduced its iPAQ, a machine that ranges in price from $499 to $799. Compaq, which took only four months to design and bring the iPAQ to market, is targeting corporations, but unlike previous lines in its computer lineup, the iPAQ dispenses with legacy technologies such as the traditional connection port, and instead features a pair of universal serial bus (USB) ports located on the front of its small silver and black chassis. Officials say that approach should benefit customers by reducing the cost and complexity associated with the PC. Compaq says the upshot is a simpler way of setting up and maintaining the system.

"You won't hear me say PCs are going away," said Jerry Meerkatz, vice president and general manager of Compaq's Desktop PC Division. "The future is in simplifying the PC and making it more stable."

Consumer-focus
Dell Computer Corp. is adopting a similar tack. The company on Nov. 30 plans to announce a consumer-focused legacy free PC, called WebPC. The system, which is expected to provide simple Internet connectivity, will be designed around a set of USB ports. WebPC will also include a set of customized support services.

This is not a one-shot deal. In designing future PCs, Dell (Nasdaq: DELL) intends to focus on delivering excellent connectivity to the Internet in smaller-sized, more stylish plastics, said Carl Everett senior vice president of Dell's Personal Systems Group.

WebPC, "is the first machine that's well thought out for the Web," he said. "We need something right now ... to kind of strike out in a new direction."

But legacy-free is only the first step that Dell and Compaq will take.

On Tuesday, Compaq demonstrated an Internet access appliance, code-named Clipper. The device, which is still a prototype, is based on a Microsoft technical specification Windows CE-based appliances will be used to access the Internet. Clipper offers a flat-panel display and a wireless keyboard; and like the iPAQ, it will give rise to a family of products, including portables and a series of wide-area wireless offerings, Meerkatz said.

Dell, which will begin to articulate its new PC/appliance strategy next week with the WebPC launch, is thinking along the same lines.

"Whatever we call this category, the products are going to be explicitly compatible with the Internet and the PC," Everett said.

Dell is planning, in the near future, to sell "specific target devices," Everett said. It isn't clear yet whether Dell will build the devices itself or partner with other companies who manufacture them. However, "In the future, you'll see us bundle up appliances that provide good connectivity with the PC," said Everett.

Another Web Companion Windows CE device unveiled at the show consists of a table with a 10-inch screen that connects to a PC via the wireless technology 802.11.

Service and content are other areas where the PC makers are thinking outside the beige box. Where they have concentrated on delivering their hardware and support services in the past, Dell and Compaq are now devising plans to deliver content.

"We're talking to some people about loading content on our hard drives," Everett said. "It could be an important peripheral (to the PC)."

He also said that Dell could also deliver content via its Dell.net service.

IBM (NYSE:IBM) and Hewlett-Packard Co. (NYSE: HWP) have similar legacy free plans. But also in the hunt for PC customers' business is Sony Corp. Sony also intends to utilize broadband Internet access to deliver content, such as music or movies to customers buying its PCs and its forthcoming Playstation 2 gaming/Internet appliance device.

The Wintel duo weigh in
Intel Corp (NASDAQ:INTC) and Microsoft are also playing an enabling role in these developments. The two companies will likely work behind the scenes to deliver component technologies and software for legacy-free PCs and appliances.

Microsoft is working to deliver Universal Plug and Play, a technology that will allow a multitude of devices to communicate over a network. The company is also developing more user friendly versions of Windows for consumers, including a Windows 98 Second Edition follow-on, called Millennium, that is due next year.

Intel is delivering enabling technologies, such as socketed processor packaging that is more friendly to the tighter confines of a legacy-free PC as well as a new small form factor motherboard used in iPAQ, called Flex ATX. This board will be utilized by a number of PC makers, going forward. The chip maker is also working to help deliver design guidelines for easier to use PCs. The company also lent development assistance to Compaq's iPAQ.