Tablet PCs: Poised for Growth?

— -- The Tablet PC market is set for steady growth between now and the end of the decade, research firm In-Stat said this week.

However, the biggest hurdle to this growth could come from the Tablet PC's main backer, Microsoft, if that company decides it is serious in promoting a new lower-priced, consumer-oriented product category, In-Stat says.

The Tablet PC market is due to grow from $1.2 billion in 2004 to $5.4 billion in 2009, with the U.S. remaining the biggest market followed by Europe then Asia, according to Brian O'Rourke, a senior analyst at the company. In-Stat classifies Tablet PCs as devices that run the Windows XP Tablet PC Edition operating system.

To date, Tablet PCs have been more expensive than notebook PCs and used mainly in vertical markets such as health care, real estate, and insurance, O'Rourke says.

But there signs that companies outside of these specialist markets are beginning to purchase the machines for use by middle managers. One of the main reasons for the growing, if still limited, popularity of these devices is falling prices. Average prices for Tablet PCs have dropped well below $2000 this year, he says.

O'Rourke declines to reveal In-Stat's forecast for unit shipments.

In-Stat's findings come after Microsoft signaled several times that it is still committed to the Tablet PC more than three and a half years after Bill Gates, the company's chairman and chief software architect, predicted that they would become the most popular form of PCs sold in the U.S.

In January, Microsoft said it was working with PC vendors to push Tablet PC prices to within $100 to $200 of comparable notebooks and, in June, Gates reaffirmed that the company continued to invest in software improvements to help push Tablet PCs into the mainstream.

If Microsoft combines its Tablet PC operating system with the new Windows Vista operating system, formerly known as Longhorn, this could help push Tablet PCs into the mainstream, O'Rourke says. Windows Vista is due in 2006.

But Microsoft could quite easily kill off the Tablet PC market, too, he says.

In April, at the Windows Hardware Engineering Conference, Gates announced that he was considering pushing a potential rival portable computing platform into the market called Ultra Mobile 2007.

In remarks posted on Microsoft's Web site, Gates said he envisioned Ultra Mobile 2007 as a new category of device that would cost between $800 and $1000, and weigh as near to a pound as possible. These devices would have a consumer friendly bent and would integrate a camera, a phone,and a touch-screen, and offer music and video playback functions along with very long battery life.

"The Ultra Mobile 2007 adds another portable PC platform to the market. If it coexists with Tablet PCs, it could detrimentally affect sales of Tablet PCs. Microsoft may intend the Ultra Mobile 2007 to succeed or even replace the Tablet PC," O'Rourke says.

While growth prospects for the Tablet PC look rosier, the devices remain a small slice of the overall market. Tablet PCs will not account for more than 5 percent of the notebook PC market through 2009, he says.