Microsoft Corp.'s debut last week of a Tablet PC powered by Transmeta Corp.'s Crusoe processor represents a high-stakes play for both companies in a U.S. market plagued by numerous duds.
Microsoft's efforts to push its Windows operating system into the Web appliance market comes even as Gateway, 3Com, and other players are either discontinuing product lines or putting developments on hold.
For Santa Clara, Calif.-based Transmeta, a Microsoft design win is a sign that its low-power processor is still viable for volume computing applications, despite its uneven success in lightweight notebooks.
Analysts note the outlook for Internet appliances, particularly outside the United States, represents a significant growth opportunity for both companies. This was underscored by Texas Instrument Inc.'s announcement last week that it plans to build an information appliance design center in Taiwan.
"As the global market for Internet appliances strengthens, Micro-
soft, along with anyone else, won't write Internet appliances off just because they're slow to take off in the U.S.," said Tim Bajarin, an analyst at Creative Strategies Inc., Campbell, Calif. "They're very user-friendly, and Transmeta's original reference design will deliver on this specification."
The Tablet PC will offer Redmond, Wash.-based Microsoft another market for its Windows operating system, allowing Web appliances to serve as peripherals to office PCs. The device will feature a handwriting recognition function that offers better performance than competing handheld devices, according to the company.
Several hundred OEMs are sampling the device, and Microsoft hopes this will translate into Tablet PC-based products coming to market by 2002.
The Tablet PC's design is based on Transmeta's Crusoe TM5600 X86 processor, which packs 600MHz into a device that consumes 0.5 to 2W. Intel Corp. is reportedly designing a competing chip for Tablet PC applications.
The Microsoft device will also have an RF connection based on a PCI card offered by Lucent, 3Com, and other OEMs, according to one industry source.
The PC factor
But despite analysts' speculation that Transmeta's true market niche is in Internet appliances-an assertion underscored by the Tablet PC design win-Ed McKernan, director of marketing at Transmeta, said the company remains true to its original focus on PC notebooks.
McKernan said, "95% of our sales are in regular notebook PCs from Casio, Fujitsu, Hitachi, NEC, and Sony. We haven't seen Web appliances really get off the ground. People [overall] tend to opt for a low-cost PC instead of an Internet appliance."
Neither will the Internet appliance market offer a comparable outlet for Microsoft's operating system or Intel's chipsets like the PC market has, said Egil Juliussen, an analyst at eTForecasts, Buffalo Grove, Ill.
"Embedded computers have limited hardware resources and are not designed for expansion. This makes current PC standards too resource hungry for information appliances and limits the power that Intel and Microsoft can gain," Juliussen said. "Both Intel and Microsoft will become major players in the Internet appliance market, but they will not get the dominant shares they have in the PC industry."