Is Microsoft's UMPC Too Expensive?

Posted on March 24, 2006

Microsoft UMPCManaging Technology @Wharton has an article that discusses whether sales will be good or bad for Microsoft's new UMPC (ultra-mobile personal computer) due by this Summer. Intel also has an information page about the UMPC. The devices have a 7 inch display and weigh 2 pounds.
Regardless, the initial reaction to the UMPC, announced by Microsoft on March 9, will become clear in just a few months. The first UMPCs -- small computers with 7-inch screens that are designed to occupy a niche for consumers who want a device larger than a handheld yet smaller than a laptop -- are expected in the second quarter ending June 30 from electronics manufacturers such as Samsung, Founder and Asus. UMPCs, priced between $599 and $999, promise to run all the applications that a Microsoft Windows desktop computer does.

On the plus side, products like cell phones and the iPod didn't initially strike consumers as must haves, but became big hits. On the other side of the ledger, products like Apple Computer's Newton, a handheld computer that debuted in August 1993, was a commercial flop in large part because its handwriting recognition software didn't perform well. Microsoft, for its part, has attempted to create new categories of computers before, as with its Tablet PC, which analysts say has yet to be a big seller beyond select industries such as health care and financial services. However, even commercial flops can be deemed a success if they blaze a path to new categories of products. For instance, Apple's Newton was an early disappointment, but forged the way for handhelds like the Palm Pilot 1000, launched in March 1996.

So what will be the fate of Microsoft's UMPC, formerly codenamed "Origami"? According to Clemons, there is potential for the devices, but he won't know how much until he gets to play with one. Kendall Whitehouse, senior director of advanced technology development at Wharton, says the UMPC is a good way for Microsoft to spread its software into all forms of devices as they begin to converge. Wharton marketing professor Eric Bradlow suggests that Microsoft has a sales challenge convincing consumers they need another device that is a "tweener" between a laptop and a handheld. Jagmohan S. Raju, also a Wharton marketing professor, predicts that the UMPC will have a tough time competing due to its high price. And Robert Shelton, co-author of Making Innovation Work (Wharton School Publishing), describes the UMPC effort as another attempt by technology companies to use innovation to create new markets by finding just the right mix of size, functionality and price.

There is a need for a mid-sized device, like the UMPC, for reading content because a cell phone screen is too small for reading long documents. However, it unclear what the size of this market is. Price is the one of the biggest questions. Will people pay $500+ for a device that is between the size of a Tablet PC and a cell phone. On expert cited in the Wharton article believes convincing people to pay over $500 for the UMPC will be Microsoft's biggest challenge.

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