Write-on: the Tablet solution to IT's ills

As Microsoft talks up a system that recognises handwriting, is a tech revolution here?

The IT sector is sick, but its last hope could rest in a new course of tablets. In two weeks' time, Silicon Valley's latest offering is due for its UK launch, and an awful lot is riding on it.

The fortunes of the IT giants, particularly those involved with PCs, have continued to deflate well past the end of the internet bubble and the worry is that the likes of HP, Sun and Intel are heading into seemingly relentless decline. This year alone, Nasdaq stocks have lost a third of their value, and the S&P 500's list of the year's biggest losers is a roll call of its former technology darlings. Slightly better recent results cannot disguise the truth: the industry desperately needs a cash cow.

Step forward the TabletPC, a new type of computer billed grandly as the "next stage in the evolution of the PC". Many of the industry's finest – including Intel, HP, Toshiba and Acer – have got behind the project, but Microsoft is the name that stands out. With his prized Xbox looking more and more shaky, Bill Gates wants to prove he is still at the cutting edge.

The claim being made by the TabletPC's inventors is nothing short of the death of the keyboard. The machine will feature a plasma screen roughly the size of an A4 sheet of paper and will allow people to input, edit, send and receive data using an electronic pen or their own voice.

"We'd expect that people who are buying laptop computers today to be TabletPC buyers of tomorrow. I can imagine a time, perhaps in three years, when the laptop looks very old-fashioned," says Neil Holloway, Microsoft's UK managing director.

Microsoft is not the only one with a lot riding on the project. The largest hardware element of the TabletPC comes from HP, the computer giant formed out of the recent merger of Hewlett-Packard and its old rival Compaq.

The merger process was by no means simple, and was largely pushed through with firm promises of "complementary technologies". The TabletPC represents the first product of the merged group, and HP needs to prove that the company is greater than the sum of its parts. It certainly has high hopes for the machine, and trots out the same party line that it has the potential to replace the laptop entirely. In HP's case, that statement takes a lot of guts, since Compaq made its fortune as the leader in laptop and palm-top computing.

Anticipation of the TabletPC has been the hottest topic on the internet message boards for more than a year. The idea of seamlessly converting written notes to text, and combining that with a high-powered PC, has whetted a lot of appetites. But there remain large pockets of doubt.

Much of that centres on the absentees from the project, of which IBM is the most notable. Mr Holloway brushes aside that concern: "To be honest, that's their choice. Some companies may decide to join at a later stage. But it's only a matter of time before others join."

Sources close to IBM, however, paint a different picture, and there are many analysts who believe that people should hold off from criticising Big Blue just yet. IBM is a massive investor in its own research and development projects, and has been quietly developing the MetaPad, a hugely powerful device of which little is known. One popular theory is that IBM is planning to release a machine using a Linux rather than a Microsoft operating system.

Microsoft's long-standing rival, Sun Microsystems, is also cynical. It argues that the launch of the TabletPC is little more than a ruse to gain a stranglehold on a new market. Mru Patel, the company's UK manager of "Desktop Solutions", says: "Microsoft has realised that its biggest threats are Linux and Sun's Star Office. Microsoft has realised that this equates to around 50 per cent of its day-to-day revenue. Because PC sales are declining and people don't see the need to upgrade from Windows 98 to XP, Microsoft is worried. Therefore it is taking advantage of its monopoly and tempting people into an upgrade."

The most ardent critics of Microsoft describe the TabletPC as a cynically constructed stalking horse built to guarantee Mr Gates another era of operating system dominance. Recent setbacks on the anti-trust front, including a significant Californian ruling last week that Microsoft unlawfully protected its mon- opoly, are a constant reminder of the group's thirst for market control.

The TabletPC has been developed after more than three years of research and development. When launched, it will have a similar specification to a top-end laptop and insiders say it will go on sale for around £1,700.

Neil Laver, Microsoft's Windows product marketing manager, says that the Tablet- PC has been designed to make computer use "more natural". However, when it was first introduced to journalists in the US, it didn't receive a wholly positive response. Some users complained that the TabletPC didn't recognise their handwriting. Perhaps in anticipation of this discovery, Microsoft also made sure that the test machines were not distributed until it had de-livered a subtle one-day indoctrination session explaining why the TabletPC was about more than handwriting recognition.

Mr Laver says: "We were still fine-tuning the handwriting feature. Since then we have improved it."

In developing the software, Microsoft sought handwriting samples from 40,000 people in Edinburgh, Manchester and Reading. But Mr Laver concedes: "Handwriting rec- ognition won't work for all of the people all of the time. It will take a number of years to mature."

When the TabletPC is launched, there will be very little talk of its ability to rec- ognise speech. "In the UK we are really de-emphasising this technology," says Mr Laver. "Speech-recognition software is much less developed. It's great if you've got an American accent, but it's not yet tuned for the British accent."

Like DVDs for the film industry, the IT sector has realised that new formats can produce a dramatic turn-around in sales. If all goes according to plan, the TabletPC could be the fillip needed to make IT seem like a growth sector again.

But clearly it is Microsoft that has the most to gain or lose from the project. The group was last week finally able to give the market some cheerful news on profits, but all of that relies on its effective control of the software most of us use.

With the TabletPC, all the familiar signs of colonisation are there already: the company is deliberately courting business customers; it is getting in on the ground floor of a new technology; and, Microsoft hopes, it will profit from a global addiction to tablets.