Profit Boosters

Many providers of desktop and portable PCs are struggling to generate new business. Fortunately, there's no shortage of newer add-on products that suppliers can sell as a way to boost revenue. Increased demand among end users for better security, more mobility and convenience, greater memory and other capabilities are fueling growth in the market for peripherals--and that should give systems builders more business in the coming year.

Some of the emerging add-on products white-box providers can sell with their desktop and notebook devices include biometric readers that attach to systems to enable secure authentication; wireless, multifunction keyboards; and Flash-memory storage devices. These add-ons, in fact, are beginning to account for a growing portion of their revenues.

The new revenue opportunities come at a time when PC providers are facing a tough market due largely to price erosion, says Nicole D'Onofrio, mobile computing analyst at Current Analysis, a San Diego-based IT research firm. D'Onofrio says even the notebook-computer market, which is typically more profitable than other areas in the PC sector, is quickly becoming commoditized.

"Everyone is struggling to make money in the PC market," she says.

One add-on area that continues to generate plenty of interest is information security, as consumers and business users look for ways to protect their devices and data. More PC providers are beginning to integrate biometric fingerprint readers into their product lines to protect access to computers.

Some readers are standalone units, while others are built into mice or PC cards. One of the leading vendors, Identix, offers several products for custom PC builders. One is a fingerprint reader called BioTouch 200, which provides network and desktop security while maintaining user privacy and confidentiality. The product features a USB interface so it can be plugged directly into a desktop PC or laptop, and CMOS camera technology that captures high-quality images for greater fingerprint accuracy.

Digital Persona, another company providing biometric readers to the white-box PC market, offers a USB fingerprint reader called U.are.U 4000B Reader. The product, which is suitable for Windows-based desktop and mobile PCs, uses optical fingerprint-scanning technology for high-image quality.

Keyboards with added functionality is another area to consider. For example, this year Microsoft introduced a product called Remote Keyboard for Windows XP Media Center Edition. The keyboard, which integrates a mouse and remote control, enables users to wirelessly control a computer and home-entertainment center.

Another hot add-on area is Flash-memory storage. Vendors, including SanDisk, Toshiba, Samsung and Lexar, are marketing removable storage devices that can be used in laptops and other lightweight computers.

Among the common types of Flash-memory systems are removable Flash-memory cards that can hold up to 128 MB of data and have a high-transfer rate for copying and downloading, and USB flash drives that function as portable hard drives with up to 2 GB of storage capacity. As more desktop and mobile computer users generate greater volumes of data and create digital libraries, they will want to buy external storage devices, D'Onofrio says.

CompAmerica, a Cranford, N.J.-based provider of custom laptops, PCs and servers, markets a variety of add-on products. In the area of security, CompAmerica sells several biometric devices with its PCs, including a thumb scanner and a fingerprint scanner security pad.

"We're seeing a lot of interest in security peripherals, as well as biometric-access technology embedded in laptops," says Jack Shulman, chairman and CEO of CompAmerica.

Also hot are storage peripherals, including higher-speed drives. Shulman says CompAmerica carries a broad array of storage products, and he expects to see increased demand for higher-speed Serial ATA drives in 2006, particularly for portable computers, to support growing applications, such as video processing.

Another peripheral product CompAmerica sells, the DigiMemo Digital Pad, is a lightweight electronic paper-pad that creates and stores handwritten text and drawings. Pages can be stored within the device and transferred to a PC to be incorporated into e-mail, word-processing documents and other applications.

All told, Shulman says the add-on devices account for 20 percent to 25 percent of CompAmerica's profit margin.

White-box provider Xotic PC in Lincoln, Neb., says add-on products for PCs account for some 5 percent to 10 percent of the company's revenue. Xotic is selling an increasing number of fingerprint readers that plug into notebook computers, says Justin Nolte, owner of the company. He says Xotic is exploring new peripherals, such as keyboards with built-in fingerprint readers, from vendors including Microsoft and Logitech.