AT&T; Pulls the Plug on Wireless Communicator : Technology: Company says its EO didn’t sell well enough. Move comes even as PCS licenses are being pounced on.
Even as bids reached towering heights at a federal auction of the airwaves for the newest generation of wireless communications devices, AT&T; announced Wednesday that it is giving up on EO, a 3-year-old venture that sought to exploit exactly that market.
EO produced a so-called personal communications device--a hand-held computer that can send electronic mail, among other things--that flopped in a market that has proven slow to develop. AT&T; said that when its partners refused to invest more money to rejuvenate the product, it decided to pull the plug.
“Given the slow development of the personal communicator market generally and the low acceptance of EO’s products, AT&T; believed it would not be prudent for AT&T; to invest more in EO without additional financing from other investors,” said Carl S. Ledbetter, president of AT&T; Consumer Products and an EO board member.
In an interview, Ledbetter said he sees no irony in the fact that AT&T;’s pullout occurred during the week that investors were pouring about $470 million into the Federal Communications Commission’s auction of licenses to operate such devices--far above expectations.
“The bidding on the licenses shows an enormous number of people are willing to bet that there will be an enormous market when we get it right,” Ledbetter said. “We are still a long-term investor in this business category, but EO’s implementation may not be it.”
AT&T; wouldn’t say what it had invested in Sunnyvale, Calif.-based EO. The company said it will take a charge against earnings, but it said the charge will not have a significant effect on corporate results.
EO can take some comfort in the problems facing everybody else in the business. Virtually all companies looking at the personal communicator business--including Apple Computer, Motorola, Compaq, Microsoft and IBM--have complained of unusually tough hurdles in designing products that combine multiple technologies, tackling a new market and facing high requirements for quality, price and usability.
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EO was formed in 1991 with backing from such big names as AT&T;, Japanese electronics giant Matsushita Electric and Italian computer power Olivetti. The idea of a portable device for the mobile executive that could be a phone and fax as well as offer e-mail was attractive and received much publicity. EO predicted 100 million personal communicators would be sold by 2000.
But when the product came out in 1993, it cost $3,000, weighed six pounds and was the size of a note pad. Customers weren’t interested. Only 10,000 of the gadgets were sold. The company cut its 200-man staff in half in February. The closing will throw 97 people out of work.
“It may take 10 or 12 years before we can look back and say this market was successful,” Ledbetter said.
Technology shortcomings were a key factor in problems at EO as well as with Apple’s Newton. Both products relied heavily on handwriting recognition to avoid having to include a large keyboard. Users found the technology clumsy and impractical. Handwriting technology will play a far smaller role in new products such as Microsoft’s WinPad.
The EO product’s greatest strength, its cellular phone, also proved to be a great weakness. While consumer use of cellular phones is subsidized by service providers, so that one can buy for $100 a phone that may cost five or 10 times that to make, EO had to charge customers the full cost of adding a phone to its device.
Apple Computer introduced a second version of its Newton to respond to complaints about the handwriting-recognition problem as well as the lack of communications on the device. But while the Newton can now receive e-mail messages, it must be plugged into a phone jack to send them.
A new generation of devices is trying to learn from the tribulations of EO and Apple. But they are facing tough engineering and marketing challenges.
Motorola said earlier this month that shipment of its Envoy, a $1,500 device that could send and receive faxes and e-mail, would be postponed until the end of the year for additional testing.
“These systems are very complex,” said Jeff Morris, vice president of marketing at Motorola’s wireless data group, citing the challenge of combining a new operating system with a computer and a wireless transmitter. For example, the microprocessors, which provide the computer capability, and the device’s transmitter tend to interfere with each other’s operation unless they are properly shielded, he said.
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The difficulty of bringing together all of the various elements required to make the personal communicator work means the handy devices won’t arrive as one great revolutionary gadget everybody will want, said Gerry Purdy, editor of Mobile Letter, an industry newsletter.
“You’ll see this developing step by step,” he said, adding that the first big step won’t come with expensive products such as Motorola’s Envoy but with cheaper devices such as two-way pagers that can send and receive snippets of text and voice messages.
But such low-cost devices may create demand for the more sophisticated products now coming on the market. Such use will also help create the communications infrastructure needed to support the personal communicator business.
Personal Communicators
At&T; is pulling out of the market for hand-held communications gadgets though some forecasters see a fast-growing future for them. Here are some of the devices available now or slated for introduction in the next few years.
* Compaq: Plans a hand-held communicator in mid-1995 that will use Microsoft WinPad, a portable extension of Windows. The product offers E-mail and software for scheduling and other personal tasks.
* Apple Newton: The second-generation product is still selling slowly. Apple is targeting corporate customers as opposed to the general market. The Newton has a similar range of functions as promised by WinPad.
* EO: A startup backed by AT&T;, Matsushita and Olivetti that sold 10,000 units and is now liquidating. The device is a cellular phone with fax and E-mail capabilities.
* Motorola and Sony: Both are expected to introduce devices this summer using Magic Cap, software produced by General Magic. Features: e-mail, home shopping, personal productivity.
* Bell South: A product called Simon, built by IBM and Mitsubishi Electric, was expected out in March but is now slated for late summer. Fax, pager, cellular phone and E-mail.
PROJECTED SALES
Sales and projected sales of personal communicators in the United States, in thousands: ‘93: 9 ‘98: 2,250 (projected)
Source: International Data Corp.
