The Mini-Computer Wars

By Jeremy Caplan

While Apple's iPhone launch was absorbing all the available buzz this winter, two dueling teams of technologists were feverishly finalizing gadgets they hope will refocus the spotlight. The FlipStart, dreamed up and funded by Microsoft co-founder Paul Allen, launches in April. Its creators call it the first fully powered ultra-mini PC, or UMPC, that is satisfying to use. Meanwhile a team led by ex--Apple star Jory Bell has countered with the OQO2--a palm-size computer that stakes a similar claim with a slightly different approach. These aren't the only machines to claim UMPC status, but they're among the first to package a new generation of processors, batteries, screens and memory chips into devices that are more portable than laptops and more powerful than cell phones.

Allen, 54, sees UMPCs as nothing less than a game changer. "We're going to see an explosive evolution of devices like this," he says, "because people want to carry their personal computer with them wherever they go." Laptops are too bulky for that task. Allen likens the FlipStart's prospects to the potential he saw in RIM's early BlackBerry. He says passersby once marveled that he could use it for e-mail. "Now everybody has some kind of mobile device like that." To feed their growing digital appetites, Allen says, consumers want something even more powerful that can handle the spreadsheets, video, e-mail attachments and software that mobile phones can't deal with. Allen is betting that even a smart phone like Apple's won't have the computing power--or screen size--to satisfy users.

The last time Allen threw himself into hardware, he created a mouse in the early '80s to boost the fledgling software venture he had started with his school buddy Bill Gates. Allen and Gates met in 1968 at their Seattle private school, Lakeside, where they became protonerds. They spent so much time programming a primitive computer that they could teach their peers--and teachers. Both later dropped out of college to get Microsoft going, but after Allen received a diagnosis of Hodgkin's disease, he stepped down in 1983--the same year his father died.

Like Gates, Allen now devotes much of his time to giving away lots of money. He still has a fortune north of $15 billion and has remained active in the tech world, investing in a series of start-ups, from AOL to early wireless networks. He scored big with such outfits as DreamWorks and Ticketmaster, while some of his other investments have struggled, like Egghead Software and Purple Moon, a failed CD-ROM venture.

In 2000, Allen was wondering why laptops couldn't be more portable. And wonder can get funding in a hurry when its owner is Paul Allen. His R&D team, part of his Vulcan research group, started project Sybok, named for Spock's half brother. After a series of prototypes--with names like Dolphin, Eagle, Falcon and Gecko--the team members nailed a version in 2004 that met their goal of shrinking a laptop to one-eighth its size. But it was too hot for laps, so it was scrapped. A faster, slicker processor has since cooled things down. Today, however, the heat is external. In the decades since Allen birthed the Microsoft mouse, hardware competition has roared. In addition to OQO, Sony and Samsung have released mini laptops in the same $2,000 range as the FlipStart. And Apple looms as a dark horse.

Despite advances in technology, typing may be the deciding success factor. The OQO2 differs from the FlipStart in featuring a slide-out keyboard rather than a traditional clamshell top that flips open for laptop-like input. "My mother forced me to take touch typing in high school, and I've always been glad for that," Allen says. He argues that the FlipStart's flat bottom lets users put it down to type comfortably.

OQO CEO Bell, who helped create Apple's legendary Titanium PowerBook, says that's the wrong approach. On-the-go users want to check their calendar on a train or get Web access while standing in line for a movie, he says. "Putting a mobile device like this in a clamshell feels like old-think. It's a holdover of how people viewed the last generation of computing. We're creating the next generation of computing." Did he just call Paul Allen out of touch?

Like their rivals, members of the OQO team, which got going in 2000 and has received funding from Paladin Capital Group and Motorola, spent hundreds of hours designing and refining prototype keyboards. Theirs is more about thumb typing than table typing. They obsessed over the mini-mouse device that controls the cursor, called a "trackstick," trying to make it feel, in their words, "buttery." FlipStart took a more-is-better approach, incorporating both a trackstick and a touch pad.

The broader challenge for FlipStart, OQO and their rivals is establishing a market. Although 228 million computers were sold worldwide in 2006, and a billion mobile phones, demand for ultra-mobile computers may not even reach 150,000 in 2007, according to Tim Bajarin, president of Creative Strategies, a technology consulting firm in California's Silicon Valley. Bajarin expects that mini-PC sales won't near the million-a-year mark until 2009 and may fall far short if prices don't drop fast. "To get into the millions of units, they'll have to sell for no more than $599," Bajarin says.

Given that business travelers can get a basic laptop and a cell phone for $2,000, they may hesitate to shell out that much for an early-stage UMPC. That's why Bajarin calls this a "missionary" year for the category, which is counting on early-adopting corporate types who can expense their purchase.

Some analysts are skeptical about the whole category. "Not everyone is keen on the idea of thumbing his way through life," says Shiv Bakhshi, a mobile-device expert at IDC, a Massachusetts research company. An early review from eWeek derided the 1.75-lb., $1,999 FlipStart as "the three C's: cool, clunky and costly," while Infoworld called it "flat out unusable for work." Using it is a lot like handling a laptop with a shrunken screen and keyboard; it's fine for a few minutes, though you'll feel cramped working for a longer stretch. But there are strengths too. FlipStart has a handy mini outer screen for checking e-mail while the device is closed. And the OQO2 comes with an elegantly designed docking station that lets you use a full-size keyboard and screen when you're not traveling.

Adding to the design drama is the possibility that Apple may jump in, which could both legitimize the category and add a killer competitor. Now that CEO Steve Jobs has modified the Mac operating system for the iPhone, he could use that slimmed-down version for other mobile devices. Apple could employ flash memory instead of a standard hard disc, extending a mini Mac's battery life and allowing it to start up quickly, like a phone. A Jobs subnotebook would likely be bigger than FlipStart's but smaller than a laptop. Apple would have a distinct software advantage, given its focus on nongeeks.

Allen's not worried. Although the device he's launching is larger than the one he once envisioned, Allen says it packs everything business travelers want in a portable package. "I've always been captivated with problems that really need solving--what should exist and how we could create a solution." His solution works, but the real question is whether there was a problem to solve in the first place.