Are Ads Too Late For Windows CE Handhelds?

Microsoft has launched a print advertising campaign to erase misconceptions about its Windows CE platform, but some wonder whether the ads can reverse the history of sluggish sales and consumer confusion associated with the handhelds. The campaign will initially be directed at clearing the air around the PC Pro, Microsoft's name for handhelds that are powered by the Windows CE operating system and are about the size of mini notebooks. HP's Jornada 820 is an example of a PC Pro. Later, the campaign will come to promote palm-sized CE devices.

The effort is also aimed at chipping away at 3Com's PalmPilot, by far the most popular handheld--regardless of size distinctions--which has its own operating system. The handheld PC Pro--which, confusingly, is also known as the H/PC Pro, a.k.a a Jupiter device, a.k.a a PC companion--is the largest of the three classes of devices that run Windows CE operating systems. Some analysts say that the H/PC device is too close to lower-end notebooks, without all the power and functions of such notebooks. "With the cost of laptops coming down, it's not a rational purchase for a lot of consumers," Seamus McAteer, an analyst with Jupiter Communications.

But some observers believe that a campaign which effectively communicates the benefits of the H/PC could jump-start sales. "We have been saying from the beginning that there is a dust cloud over everything, and once it settled, we would all understand what Jupiter is," said Theresa Nozick, of Mobile Insights, an industry newsletter. "This is absolutely necessary," she said. "But the ad campaign has to be really right on. It really has to explain succinctly what you're getting," with a handheld PC.

Microsoft seems to be getting the message. The ads can be seen this month in print publications like Business Week, the Wall Street Journal, the New York Times, and various trade publications, said Roger Gulrajani, group product manager for Windows CE. "We want to provide some education on what handheld PCs are, and how customers can use them," Gulrajani said. "It's the 'what the heck is a handheld PC?' campaign," he said, referring to the tag line of the ads.

Although the CE category was expected to have benefited from the marketing weight Microsoft and its manufacturing partners have brought to bear on it, sales have been disappointing, and Microsoft admits that it has failed to fully communicate the features of the new class of device. Windows CE PC companion class devices actually lost market share to other devices in 1998, according to International Data Corporation, dropping from 17.8 percent of the market in 1997 to 17.3 percent in 1998.

IDC forecasts anemic growth for the device class over the next few years: H/PC devices will account for 18.5 percent of the handheld market this year, growing its market share to 23.3 percent in 2002, IDC predicts. So what are the benefits? The campaign hypes the H/PC Pro's long battery life and "instant on," which are enabled by the operating system. Unlike palm-sized computers, H/PC Pro devices also come with fairly full-sized keyboards and modems. Consequently, they can be used as productivity devices.

"We're really not trying to say, 'this is about Windows CE,'" Gulrajani said. "This is a solution which is a handheld PC, with a software component and a hardware component." The ads will also focus on what the H/PC Pro is not. Consumers have expected full PC functionality in the notebook-like device, which is not what it offers. The ad copy explains, Gulrajani said, that consumers in the market for a full-featured notebook should not buy an H/PC Pro. Despite lacking notebook functionality, they don't cost that much less than the lower-end notebooks. H/PCs cost anywhere from $700 to $900 dollars, just below the range of a low-end notebook. Some analysts feel even an ad campaign can't save the H/PC Pro from relative obscurity as a niche product.

"Although there is demand among the high-end segment for a lighter laptop, these users also want a lot of performance, and they don't get it with these devices," McAteer said. Later this year, Microsoft will expand the campaign to include ads for its new color display palm-size PCs, which have failed to make much of a dent in the sales of market leader Palm Computing's PalmPilot. Palm recently launched its own advertising campaign in support of its PDA, with the tag line, "Simply Palm." Palm seems to be taking a traditional marketing strategy which is designed to appeal to the 80 percent male PDA market: Its ads feature what appear to be naked women holding PalmPilots. Microsoft will not be following in Palm's footsteps when it launches its palm-size PC ads, Gulrajani asserted.

"We're taking a different approach," he said. "It's safe to say you won't see scantily clad females--or males--in a Microsoft palm-size PC ad." He declined to comment on how much the company is spending on the campaign.

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