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Hybrid handhelds
Multifunctional devices may be the future for handhelds, but for now, there are hybrids.
By Dean Takahashi
October 31, 2002

John Mashey would love to combine his laptop, cell phone, and personal digital assistant into one device. This chief scientist and partner at the venture capital firm Sensei Partners in Menlo Park, California, likes to complain about the hassles of today's gadgets. "I want a device that sits on my belt and connects wirelessly to an earpiece," he says. "I hate having three versions of my telephone directory on three different devices."


Mr. Mashey's frustration is not uncommon. The long-promised ultimate, multifunctional handheld isn't here yet, but some hybrids are starting to appear. And consumers are finally able to choose between carrying multiple single-function devices or one combo device.

A dozen new cell phone/PDA hybrids have hit the market this year, to build on last year's launches of devices like the Kyocera QCP 6035 Smartphone and the series of Treo communicators from Handspring. Audiovox, Motorola, Nokia, Research in Motion, Samsung, Sendo, and T-Mobile all have wireless handhelds. Beyond the cell phone/PDA, other types of combo devices are in development, like an MP3 player from Kemco for the Nintendo GameBoy Advance, Tablet PCs from major PC makers like Acer and Fujitsu and sponsored by Microsoft, and full Windows XP handheld computers from startups like OQO and Tiqit Computers. Rumors are also rife that Apple Computer will enter the hybrid business with a cell phone/PDA combo that Sony will build. The number of such devices may be small now, but demand for wireless Internet devices is likely to drive growth.

Consumers are aware of the many devices that have failed in the past--they were poorly designed and suffered from bulky and hard-to-use features. Lower prices, however, are driving this latest round of new devices. The cost for components like semiconductors and displays has dropped considerably. Flash memory, for instance, cost about $30 for 32 megabytes a year ago. Now it's about $15. What's more, chip makers like Intel, MediaQ, Motorola, National Semiconductor, Neomagic, Texas Instruments, and Advanced Micro Devices' Alchemy unit have been at work for several years designing low-cost, low-power chips that are ideally suited for hybrid devices. Another factor is the proliferation of wireless technologies, like 802.11b and Bluetooth, which are making handheld devices easy to connect to each other and, therefore, far more useful for business travelers who take their offices on the road.

"It probably costs $50 for the parts to do the cell phone, and another $100 to do the PDA," says David Carey, president of Portelligent, a market research firm that specializes in assessing costs of handheld computing devices. "The barriers to entry have been dropping," he says, "and the components aren't as complex anymore."

Among the newest companies is Danger, a two-and-a-half-year-old startup in Palo Alto, California. It is selling the Hiptop device, a combination cell phone/PDA that uses the general packet radio services standard to connect at data-transmission rates of 40 Kbps (nearly the speed of a typical analog modem). The company has raised $48 million and plans to target cellular carriers with its Hiptop. (The first taker, T-Mobile, will market the device as the Sidekick.) Danger has built a back-end server infrastructure that allows it to convert any Web page into an image that can be viewed on the Hiptop's 240-by-160-pixel black-and-white screen. It's designed to enable users to access their personal data anywhere within the cell phone's reception area.

Andy Rubin, president and CEO of Danger, says his device has an edge over competitors' products because the company is offering it at cost--roughly $200--to cell phone carriers, which can then resell it to consumers for a low price, or bundle it with calling plans. By contrast, comparable devices from Handspring and Palm sell for more than $500.

Mr. Rubin says the company plans to make money by charging carriers for services that Danger will provide, like back-end processing, Web hosting, and application downloading. Danger might also make money by charging royalties to developers that create software applications for the Hiptop.

His plan may sound highly ambitious and risky, but that kind of business model may be necessary to get consumers to adopt an unproven technology. John Latta, president and founder of 4th Wave, a market research firm, notes that devices priced at $200 or less are far more attractive to the mass market than those priced at $500, and have the potential to sell millions of units more.

By plugging a digital camera into the Hiptop, users can easily snap pictures and email them to friends. Hiptop's processing power is limited, but its battery lasts for weeks because it operates on a slow 24-MHz microprocessor based on the low-power ARM chip architecture. Mr. Rubin says the device gets a boost from Danger's infrastructure, which does the heavy lifting by using servers to do such processing jobs as reconfiguring Web pages to fit the screen format.

The goal is to make businesspeople more productive as they travel, and to minimize the time they waste firing up their laptops and visiting business centers to do simple tasks like finding directions or checking email.

The question is whether consumers will buy the new gadgets. Some of the phones, like Nokia's 9290 Communicator, are heavy and bulky. It weighs half a pound and is about the size of two decks of cards laid end to end, making it tough to put in a pocket and awkward to hold while making a phone call. As for Danger's Hiptop, the device provides only limited connection speeds for now--it may be years before customers can subscribe to high-speed data services known as 3G. "At this rate, I think success is going to be measured in years, not months," says Mr. Carey of Portelligent, which has been testing a hybrid. "They have to retrain people to learn how to use these things in everyday life."

However, new technology and better bandwidth will make these hybrid gadgets more useful over time: in a single year, the price of chip components generally falls 30 percent, while performance increases 60 percent. A year from now, chips like the ARM11 from ARM, a manufacturer of microprocessors in Cambridge, England, will make it so much easier and cheaper to run video over cell phones, that they will make Danger's Hiptop look expensive, says John Rayfield, vice president of marketing at ARM's U.S. division. Color-display prices will fall gradually, too, and in time the quality of the displays and graphics chips will improve, making it easy to use most handhelds to play games that feature high-quality 3D graphics. And users won't need to affix digital camera attachments to their devices; the camera will be built in.

Devices like the Tablet PC are aimed at business professionals who are willing to pay $2,500 for a combined notebook computer and electronic note-taking pad that will fit into a handheld the size of the Compaq iPaq Pocket PC. Consumers will have the full functionality of the Windows desktop, albeit with limited battery life for now, in their pockets.

As broadband wireless services become available, activities like Web surfing and video watching will become more interactive. And shorter-range wireless technologies, like Bluetooth, will make it easy to print documents from handhelds.

In the next ten years, researchers like Vaughan Pratt, a professor of computer science at Stanford University and Steve Mann, a professor of electrical and computer engineering at the University of Toronto, envision "wearable" computers. This will permit computers to become less obtrusive, as computing functions get built into all kinds of everyday objects. The success of these devices will depend on advances in technologies like voice recognition and more flexible displays.

But time is on the side of the hybrids. Prices of semiconductor components are expected to keep declining, and chip makers are learning that performance at all costs isn't cutting it anymore: they're sacrificing performance for lower costs and reduced power dissipation. Of course, an eventual economic recovery will lead to an upturn in the semiconductor industry, and prices will stabilize. By then, consumers may be hooked on these new gadgets.

"Another spin or two of Moore's law, and we should have a single device that is really useful," says Mr. Mashey. "The plethora of devices we have now will be a historical anomaly. They will all be subsumed into fewer devices."

Dean Takahashi is the author of Opening the Xbox (Prima Publishing, 2002) and a staff writer for the San Jose Mercury News.
http://www.redherring.com/insider/2002/10/handhelds103102.html
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