Knowledge@Wharton analyses the ultra-mobile personal computer:
t may still be early in the UMPC’s evolution. Research firm Gartner notes that the UMPC may not reach its potential for another two years — when battery life improves and prices come down to $400 from the $599 to $999 estimated sales price today.
No matter how the UMPC fares, it could turn out to be a worthwhile experiment for Microsoft, which can afford to tackle new markets with the UMPC and Xbox 360 video game console because it had $34.7 billion in cash and short-term investments as of December 31, 2005. “In some ways it’s not atypical of Microsoft to invest a lot in a technology that may not deliver an immediate return,” says Whitehouse. “It has been pouring resources into the Xbox for quite a while.”
Microsoft’s UMPC effort may not need to be a short-term financial success to be a long-term winner, adds Raju. “To propagate its software, Microsoft has to have some control over hardware. Eventually there will be one portable device that is more user friendly than a cell phone masquerading as a computer.”