Wait to Buy Cheaper! COBY Plans "Moore's Law" MIDGET PC for $100 in March

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Why the wait, when we needed it yesterday? According to marketing director Bob Gee, "That's the whole idea, to wait until after the holiday-season discounting shakes down. By then, netbooks like some Asus EEE models, and even some laptops and notebooks, will be under $200. We want to show that we are the value leader, the price leader, no matter how bad the economy and deflation gets."

WHAT'S MOORE'S LAW GOT TO DO WITH IT?

Coby claims that the state of electronics miniaturization and of engineering economics has progressed to the point where "smaller is cheaper" for PCs, just as Gordon Moore showed it was for processor chips. For PCs it turns out that this works until you have to resort to folding screens and keyboards. (As always, the size of the input-output devices is the limit for miniaturization of products that must interact with human fingers, eyes, and ears. "You can fit a radio in your ear, but how you gonna tune it?")

The idea, according to Coby insiders, is to create a whole new genre of computers, "midgets" for hard times, smaller and cheaper than netbooks though not a toy. "We don't do toys," says Gee. The computer will have a "sizable" keyboard for touch-typing and will run all common consumer applications.

Right now, component prices preclude offering a full-fledged computer for less than $100. According to Coby, it will be difficult to get below $50 at retail for a full-function, general-purpose computer for a decade. The Coby "midgets" will be full-fledged computers, ready for over 90 percent of consumer applications and with drivers for all major brands of printers and other accessories.

How Big Is a Midget?

"It's smaller than a netbook but not THAT small," says another Coby insider. Screen sizes of 7 and 9 inches will be offered initially. Screen size is a key, as the screen is the most expensive component. However, the cost of LCD screens, per square inch, is coming down drastically. The keyboard looks to be about the same size as on the Asus EEE.

The initial 7-inch "midgets," as Coby calls the genre, the "PoqetMate-7" (pronounced pocket-mate) and "PoqetMate-9," are planned for a March intro. They come in a folding-lid format like other laptops and notebooks. Smaller versions of these are planned, to reduce the price further. Besides these, Coby plans much smaller, pocket PCs with foldable screens and keyboards. They will fold up like a handkerchief to fit in a suit jacket or pants pocket, but they will cost a little more at first.

How Can This Be Possible?

Again, the key concept is smaller-is-cheaper (up to a point), and "midgets" are both smaller than most netbooks -- and also much cheaper. The market here is for hundreds, not tens, of millions.

"We don't pay for sofware, either, for any of our products." According to Coby, they wouldn't use Windows even if Microsoft offered it for free. That would contradict Coby's philosophy of always lower prices, since the application programs for some applications would have to be paid for. Besides, Asus and Acer have proved that life without Microsoft is possible.

Of course, Coby's ace in the hole is always its discount marketing channels: closeout stores like Odd Lots, pharmacies like Rite-Aid, and grocers like Kroger's. "Those stores can survive on so little [margin], they're like bedbugs," says Stanley Wunderlich, public relations consultant for the Coby competitor Curtis International.

Also, the computers will be made in Coby's own factory in Foshan China. They will employ Loongson processors, a brand of the People's Republic of China, not a household name but known to be reliable.

How Big Is the Market?

Coby believes that "midgets," including toy-like devices others will introduce, will outsell all other portable computers (laptops, notebooks, UMPCs, netbooks) combined within five years. This would mean sales of over 100 million, some of which would come off of other, larger sizes. Of course, even Mr. Lee doesn't believe that Coby will have this bonanza all to itself. There will be dozens of imitators producing "midget" computers once the first one comes out, just as competitors of the Asus EEE have proliferated in a little over a year.

How Low Can You Go?

Ross Rubin, director of industry analysis for the NPD Group, a market research company, noted that major retailers, including drugstore chains and electronics superstores, are further complicating the competitive landscape by selling private-label products made in China. Such practices further drive down prices, especially in mature categories like CD players and, maybe now, computers.

Competing on low prices alone is a dangerous gamble, Mr. Rubin suggested. "There will always be someone willing to come around and undercut you," he said. Mssrs. Gee and Lee believe that their products offer a superior experience, "the Coby experience," and that their low costs, unorthodox channels (for electronics), and Moore's Law insight will protect them.