Acer Concedes Tablet PC Isn't Catching On

Still, Acer said it is moving ahead with research on "commodity technology" intended to lower the cost of tablets, and perhaps push the functionality to become a standard feature in notebook PCs. "If that happens, then it will help boost tablet PC sales and help it become mainstream," said Campbell Kan, head of Acer's notebook product line.

Kan declined to discuss details of the R&D effort, but said it could involve moving away from the higher cost digitized screens, which enable the PC to sense input from a stylus. The specialized screens are usually cited as the most expensive hardware add-on for tablet PC functionality, so engineering a cheaper alternative could give Acer a competitive edge in the stalled market for tablets.

Nearly two years after standing alongside Microsoft to launch the tablet PC, Acer has fallen short of its sales targets. By the end of 2003, Acer had hoped to see its version of the tablet -- actually a clamshell-style notebook with a swiveling screen that folds back down onto the keyboard -- would represent 20 percent of its notebook sales. It is still less than 10 percent, Kan said.

"The key, we believe, is on the applications. We know that Microsoft is working with a lot of individual software vendors for more applications. But to adopt a new concept like this takes years. But we still believe that method of input will eventually be what the end user needs," Kan said.

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Tablet PCs are expected to reach up to 1 million units shipped in 2004, up from about 500,000 last year, according to market researcher International Data Corp. Most of the tablets are going into "vertical" markets, such as health care or customer service. Acceptance by the corporate market is still slow, Kan noted, and even slower among consumers.

Elitegroup Computer Systems Co., one of Taiwan's largest motherboard and system makers, sells a slate-style PC, which has no keyboard input and is most suitable for vertical or consumer markets. It's bulky, runs hot -- despite using a Transmeta processor -- and is only selling 5,000 units a month. "My boss' target was 20,000 every month," said James Kao, a product manager.

This summer, Microsoft is expected to ship Windows XP Tablet Edition 2005, which will include Version 1.7 of its software development kit and Office applications more closely integrated with the tablet functionality.

Acer's Kan said he hopes to see new third-party applications coming out in the fourth quarter. Until then, at least, the company will stick with its current lineup of two notebook-style tablet PCs -- one with a 10-inch screen, the other with a 14-inch screen.

The company has no plans for a slate-style PC, mostly because it believes that form factor won't be successful until the "convertible" style has grabbed at least a 20-percent market share. For now, "the convertible serves as a transition to the mainstream, and the slate is a niche," Kan said. He added that the slate won't be popular as a client in the "digital home" until the price has been substantially reduced.

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