Thursday, June 24, 2010

Microsoft’s Lag Time to IPad Leaves HP, Dell Looking

Bloomberg Business Week

Microsoft Corp.’s failure to deliver a tablet-friendly version of Windows is forcing big computer makers like Hewlett-Packard Co. and Dell Inc. to rely on rival software to help them keep up with Apple Inc.’s iPad.

Windows 7, the most recent version of Microsoft’s operating system, is too unwieldy for an iPad-like device, said David Daoud, an analyst at IDC. A lighter edition won’t be ready until the fourth quarter, giving Apple almost a year’s head start in the burgeoning market for tablets.

“The Windows world needs to respond,” said Daoud, whose firm is based in Framingham, Massachusetts. “They will have to play catch-up.”

The iPad’s success caught much of the PC industry by surprise. Within two months of the April 3 release, Apple sold 2 million iPads -- more than IDC expected for the entire tablet industry in 2010. To catch up, Dell and Hewlett-Packard are turning to Google Inc.’s Android operating system. Taiwanese manufacturers that build most of the world’s PCs said they’re dissatisfied with Microsoft’s current lineup.

“We don’t have any choice for now,” said Joseph Hsu, chairman and president of Taipei-based manufacturer Micro-Star International Co., a maker of laptops and computer parts. Windows 7 is too powerful and consumes too much energy from batteries, he said.

The iPad, which can display books, videos and the Internet on a thin touch screen, will reach sales of 5.5 million units this year and jump to 13 million next year, according to Macquarie Group Ltd.

‘Feedback Is Fair’

John Kalkman, a vice president in the Microsoft division that works with computer makers, said the feedback from PC manufacturers is “fair.” Later this year, Microsoft will release Windows Embedded Compact 7, which will require less processing power and reduces the drain on batteries.

Microsoft, based in Redmond, Washington, has tried for more than a decade to build a market for tablet-sized personal computers. Chairman Bill Gates predicted in November 2001 that the tablet would become the most popular form of PC within five years.

Demand for the Windows tablets currently sold by Hewlett- Packard and Dell has been lackluster, according to IDC. Before the iPad made its debut this year, the researcher had been forecasting that sales of tablets would decline to less than 1 percent of the overall PC market in the U.S. IDC had predicted total shipments of just 523,000 tablets.

Passed by Apple

Microsoft, passed by Apple as the largest technology company by market capitalization this year, fell 26 cents to $26.32 at 4 p.m. New York time on the Nasdaq Stock Market. Palo Alto, California-based Hewlett-Packard rose 3 cents to $48.01 in New York Stock Exchange composite trading. Round Rock, Texas- based Dell declined 1 cent to $13.99 on the Nasdaq.

Intel Corp., whose chips run about 80 percent of the world’s PCs, hasn’t helped Microsoft’s cause. The chipmaker’s most energy-efficient tablet-ready processors don’t run Windows 7 -- and won’t until early next year.

Hewlett-Packard spokeswoman Marlene Somsak declined to comment on sales of tablets and notebooks based on Microsoft software. Dell spokesman Jake Whitman said Microsoft Windows, used in the company’s Latitude tablets, “helps provide a flexible and intuitive tablet-PC computing experience.”

Streak Product

Dell will begin selling a combination smartphone and tablet with a 5-inch (13-centimeter) screen in the U.K. this month. It should be in the U.S. later in the summer. Called the Streak, the device uses Android and Qualcomm Inc.’s Snapdragon chip.

Hewlett-Packard, the industry’s leader, acquired Palm Inc. to gain its own operating system for portable devices. Hewlett- Packard is also using a Qualcomm chip in a new Android product called AirLife, which it began selling in Spain this year.

Both companies plan to continue offering Windows tablets.

At Micro-Star, Hsu is waiting for Windows Embedded Compact 7. It also will be compatible with ARM-designed chips, the basis for products from Qualcomm, Texas Instruments Inc. and Nvidia Corp. ARM’s technology also is used in the A4 processor, which runs Cupertino, California-based Apple’s iPad.

Microsoft’s Windows 7 requires a full PC processor to run effectively. Chips of that class need a fan to keep cool and a big battery to keep them going for longer than a few hours.

Atom Chips

Micro-Star is developing a tablet that uses Atom, an Intel processor originally designed for low-cost netbooks. The trouble is, it lacks the power to provide the same kind of smooth video and Internet speeds as the iPad, Hsu said.

Microsoft’s Kalkman suggests manufacturers use a more powerful chip with two processors, a setup known as dual-core.

Asustek Computer Inc., the Taipei-based maker of Eee discount PCs, has a Windows 7 tablet with an Intel dual-core chip. It can run for six hours. Still, that’s about half the 10 hours offered by the iPad.

Intel plans to improve battery life by releasing a dual- core version of Atom for tablets early next year. It will use half the power while offering enough processing to provide smooth video and fast Web surfing.

“We’re very excited about the tablet segment -- we see it as an opportunity for Intel to expand its business,” Matthew Parker, a product manager for Intel, said in an interview.

Even the next crop of products -- Windows Embedded Compact 7 and Intel’s Atom chips for tablets -- may not help the companies achieve the dominance they’ve enjoyed in PCs, said Michael Gartenberg, a partner at Altimeter Group, a research firm in San Mateo, California. Neither technology was originally designed for tablets, he said.

“Because Microsoft is so entrenched in Windows, they seem to be missing these larger opportunities,” he said. “Same for Intel -- they’ve been very focused on PCs and PC-like devices.”