From tank to SUV: the slimming of the Toughbook

November 28, 2007, 10:00 AM UTC

Panasonic’s rugged laptops already rack up more than $600 million in annual sales. Can it keep growing by building brawn and beauty into one trim package?

The Toughbook Y7, T7 and W7. Images: Panasonic

Not everyone commutes to work in an armored tank, and not everyone needs a fully rugged laptop.

In a nutshell, that explains Panasonic’s latest expansion to its Toughbook line. The three new computers are not the sort you’d take into a real battle zone; for that, you’d be better off with an old-school Toughbook CF-30 (it resembles a toolbox). Instead, the T7, W7 and Y7 are 3-pound laptops are designed for white-collar warfare — and they represent the company’s best hope of capitalizing on its rough-and-tumble reputation.

What reputation is that, you ask? Unless you’re a solider, a cop or a construction worker, chances are you think of TVs when you hear Panasonic, not PCs. But for many whose work involves heavy doses of dust, drops and spills, Panasonic’s Toughbook has become standard equipment. That’s because testers at Panasonic’s facility in Osaka, Japan make sure the machines meet the military’s standards for equipment durability.

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This is Evel Knievel stuff. In one test, machines are dropped 26 times onto a surface of concrete and steel that’s covered in two-inch-thick plywood. They then have to boot up. In another, they’re subjected to temperatures swinging between 205 degrees and -60 degrees. Of course, Panasonic isn’t the only company offering laptops that meet some of these specs — Motorola (MOT), Itronix, GETAC and Kontron have their own offerings.

But at a time when most of the industry has focused on outsourcing manufacturing and building computers as cheaply as possible to stay competitive, Panasonic has taken the road less traveled. It builds its own laptops, and keeps customer service in-house. That attention to detail helped the company pull in Toughbook sales of more than $600 million last year, and maintain a nearly 60 percent market share.

“There’s a real recognition out there that computers that are on the move are computers at risk,” said Kyp Walls, a senior marketing manager for Toughbook. “If that machine fails — if that hard drive is lost –then you’re in a world of hurt.”

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But because of intensifying competition and some changes in the rugged market, things are getting more complicated. No longer is the business merely about selling death-defying laptops to those in the trenches. These days the fastest-growing segment of the market for tough laptops is “business-rugged.” These machines would never pass military muster, but they’re strong enough to survive an airplane’s overhead bin.

Why is the business so attractive? Increasingly, salespeople and other road warriors are showing a willingness to pay a premium — say, $1,500 instead of $1,000, or $3,000 instead of $2,000 — for a laptop with the familiar Microsoft (MSFT) operating system and Intel (INTC) chips that’s more likely to survive some rough handling. Profit-hungry PC heavyweights have taken notice. U.S. market leader Dell (DELL) offers a rugged version of its Latitude laptop called the ATG, and allows a company called Augmentix to make an even more rugged XTG version. Hewlett-Packard (HPQ) has also partnered with other companies on rugged computers.

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That means more competition for Panasonic. And the sleeker new laptops are an important way for the company to claim a bigger piece of a growing product segment.

“Panasonic hasn’t been able to get a lot of traction for business-rugged, but they’re well established in the fully-rugged area,” said Roger Kay, president of Endpoint Technologies, a technology consulting firm. “People are wiling to pay a slight premium for something that is business-rugged, and given the cost and revenue vectors, business-rugged is a good market.”