LOGGED ON; PINT-SIZE BETTER ON 2ND TRY; HAND-HELD COMPUTERS BECOMING RESPECTABLE.

Byline: Alan Goldstein The Dallas Morning News

The Apple Newton was such a flop after its introduction nearly four years ago that every developer of hand-held computers got a black eye.

Hyped by former Apple Computer Inc. chief executive John Sculley as representing ``the birth of a mega-industry,'' the Newton instead was roundly mocked for failing to recognize handwriting, its primary means for receiving information.

Now, with the original Newton consigned to business textbooks along with New Coke as examples of how not to unveil a product, the hand-held computer is enjoying a healthy rebirth.

The difference this time is that expectations for what hand-helds can do have been scaled back.

Rather than promise Star Trek devices that respond to voice commands for sending and receiving files, manufacturers now are pitching replacements for appointment books or, at the most ambitious level, for notebook computers.

As for the Newton itself, ``the main thing that's changed is it works,'' said Sandy Benett, chief operating officer of Newton Inc., now an autonomous subsidiary of Apple, at the company's headquarters in Cupertino.

These days, the most successful hand-held computer by far is the one that aspires to do the least. The Palm Pilot, with a list price starting at $299, began shipping in May 1996. By the end of the year, its manufacturer had sold 360,000 of them.

``We're going after the customers' most basic needs,'' said Joe Sipher, product line manager for the Pilot at the Palm Computing Inc. unit of 3Com Corp. ``The killer app for this is scheduling.''

Pilot sales this year are expected to top 650,000 units. The Pilot is so successful that it's being described as a techie cult product. In Silicon Valley and elsewhere, Pilots come out regularly when meetings start.

``I've got 1,800 contacts and all of my appointments on there,'' said Andy Berman, a Southlake, Texas, sales executive who frequently travels domestically and overseas. ``It's more important than my cell phone.''

Products in the emerging hand-held market run the spectrum, from advanced appointment devices to miniature personal computers with many of the capabilities of regular notebook PCs.

In fact, Microsoft Corp.'s Windows CE operating system, based on Windows 95, is used in a new generation of keyboard-based devices from brands including Compaq, Casio, NEC and Philips.

Most hand-held computers weigh less than a pound and fit in a jacket pocket, if not a shirt pocket. Prices range from $300 to about $1,000. They run on regular disposable batteries. Some models include modems.

Aside from keeping phone number lists and calendars, some models let users cruise the Internet or send and receive e-mail. The Windows CE models have ``pocket'' versions of popular programs such as Word and Excel for basic office tasks.

All are relatively easy to use. The keyboards on most units are too small to comfortably write much more than a short message, although the Newton has a bigger external keyboard in addition to handwriting recognition.

The Pilot uses its own modified alphabet, called Graffiti, for handwriting recognition.

``It took me 30 minutes to learn Graffiti, and now I take all my notes on the Pilot,'' said Ben McLemore, the 31-year-old president of Dallas-based Internet site developer Synapse Group. ``I'm utterly dependent on my Pilot.''

Whether hand-helds are poised to replace notebook computers for a significant segment of the market remains unclear.

Benett said the Newton does 80 percent of what a laptop can do at less than half the price.

A Newton weighs 1.4 pounds vs. 6 to 7 pounds for many notebooks. And while many notebooks have to be recharged after only a few hours, the Newton will run for 25 hours on four AA batteries.

With the Newton MessagePad 2000, Benett said, he now leaves his larger and heavier Apple PowerBook at home when he travels.

Sipher, the executive at Santa Clara-based 3Com, said the Pilot is ``not positioned as a laptop replacement.'' 3Com purchased the Palm Pilot business in June as part of its U.S. Robotics Corp. acquisition.

As for the Windows CE market, the answer is even fuzzier.

For example, Casio found 84 percent of the buyers of its Windows CE device have desktop machines and 56 percent have notebook PCs, said Gary Rado, executive vice president of its hand-held computing division.

Casio, however, has no research on whether users of the hand-held devices are leaving their notebooks behind.

In any case, the segments will evolve as hand-helds become more functional and notebook computers become smaller, blending the two, said David Goldstein, president of Channel Marketing Corp., a market research firm based in Dallas.

A widely anticipated product is referred to as the ``ultra-ultra portable,'' a notebook machine running Windows CE that would be intended as a second or third computer for the home and for light business use.

Indeed, Microsoft plans to include its Windows CE software with a host of products that include telephones and television set-top boxes, and Casio expects to follow the same route, Rado said.

Worldwide sales of all hand-held devices will rise 22 percent this year to nearly 2 million units, according to Dataquest Inc., a market research firm in San Jose.

By 2001, sales will grow to nearly 7.5 million units, according to the firm's projections.

``It's a nice market, though it's not huge,'' said Mike McGuire, a Dataquest analyst.

CAPTION(S):

2 Charts

Chart: (1-2) Poised for growth

Following a slow start, the handheld computer business now appears ready to blossom, according to market analysts.

(1) 1996 market share

(2) Handheld computer sales and forecast

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