COMPUTER SALES

In 2000, according the IDC, approximately 101.4 million desktop PCs were shipped, generating $141 billion in revenues. Many new consumers were attracted by low prices, higher capabilities, and stylish colorful designs. During the same period, a total of 26 million notebook computers, valued at $57.7 billion, were shipped worldwide, based on IDC research. Additionally, most PC vendors support at least one wireless protocol and many offer services to facilitate the transition to a wireless computing environment. It is projected by many leading market research firms that within the next two to three years, the desktop PC market will decline in favor of wirelessenabled portable PCs, handheld Pocket PCs, and other devices.

Wireless phones, PDAs, pagers, and modems are expected to surpass PCs as the most popular Internet access devices. Shipments of Wireless Internet devices will sustain doubleand triple-digit growth over the next few years. Mobile electronics sales may rise to $10.5 million in 2001, as consumers continue to enjoy the ease with which they can access information and entertainment and stay in touch with friends and family. Wireless phones maintain the largest share of that category, with sales forecast at $3.7 billion in 2001, a 16 percent increase over 2000, according to the Consumer Electronics Association (CEA). While the PDA market in the United States continue to be strong, the Yankee Group projects 13 million to be sold in 2001, growing to over 26 million in 2003. Approximately 11 percent of PDAs had Internet access, while Jupiter projects that the number of U.S. PDA users interacting with Web data and content will approach 14 million by 2005.

Major consensus holds that within the next three to five years, the majority of devices that tap into the Internet for data will not be wired personal computers, but rather a mix of handheld devices—including cellular phones, PDAs, pagers, and Pocket PCs. Research firm IDC projects that the worldwide market for these devices will grow to over 67 million units sold and $18.1 billion in revenues by 2005. Many of these devices shall also offer to the consumer new and integrated features and functions such as cameras and music players, which will make it more convenient for consumers to carry only a single device. Many of these devices will take on new form factors— designs which look less like a phone. These new devices will be designed to make viewing and entering information easier.

This same period will also witness the emergence of human-to-machine and (though still embryonic), machine-tomachine communications, provided by embedded wireless communication links for data exchange. This will improve work flow for the business user and create new opportunities for companies. This trend accelerated in Europe and Japan. Examples of human-to-machine communications via wireless networks already exist, allowing people to access content and applications from network servers. One example of machineto-machine communications is vending machines. A wireless device embedded in the machine communicates with a central computer that keeps track of how many soft drinks or other items are left; it lets suppliers know when the vending machine needs to be restocked. The device may also notify the central computer when the vending machine is in need of repairs. These devices can be attached to home appliances such as refrigerators, air conditioners, and security systems to control lights, activate alarms, and provide climate control. Other embedded devices will monitor environmental factors like carbon monoxide levels. In the vehicular environment, these devices will provide navigation aids and also work as security and theft-prevention devices. Referred to commonly as telematics, which is the blending of computing and wireless telecommunication systems, which creates useful applications for automobiles and trucks. Telematics systems often use global positions systems (GPS) or cell-based technologies to facilitate location-based services such as roadside assistance offered by companies such as GM’s OnStar. For telematics to become successful and widely accepted, car manufacturers have to agree on a standard for hardware and operating system, otherwise companies have to build specific versions of their applications for each auto manufacturer, resulting in a segmented industry.

In the United States alone, there are over 210 million existing cars and sales of new cars are about 17 million per year. Worldwide annual sales of new cars are over 50 million. According to the Yankee Group, 50 percent of new cars and 90 percent of highend vehicles will have telematics to keep users connected while in the car in 2006, which equates to a market over $25 billion. Furthermore, on the enterprise side, there are over 40 million fleet vehicles in the United States alone, which includes trucking, delivery, and service vehicles. We believe that in the not-to-distant future, connectivity with the Internet for many consumers will be via wireless device and not home PC.

The U.S. mobile phone market is expanding with an additional 11 percent of households expected to purchase a wireless handheld device in 2002, according to a survey conducted by Takar Nelson Sofres Intersearch. We find that over 40 percent of Nextel’s subscriber base has data-capable handsets and more than half of Sprint PCS subscribers have data phones. These run text-based microbrowsers that can only surf limited numbers of Web sites, but that number is growing. Using push technology, it will be possible for sites to alert users of downloadable content, based on customized settings. These early trailblazers will fundamentally change Internet usage patterns from one or two long sessions a day on an office or home PC to dozens of low-intensity sessions a day for specific Web clips or data points.