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Hot new PCs that read your writing (Fortune, 1991)

October 28, 2012, 5:00 PM UTC

Editors note: Every week, Fortune publishes a story from our magazine archives. Last week we saw the launch of two new tablets — Microsoft’s Surface and Apple’s iPad mini — so it seemed fitting to go back in time to the birth of the handheld tablet. In this February 11, 1991 article, techies marveled at the pricey new notepads that could decipher handwriting. The stylus eventually faded into obscurity (thankfully), but more than 20 years later, tablets are finally all the rage.

It was a homely device that IBM introduced in 1981, but it changed the lives of tens of millions of office workers and professionals. Big Blue’s personal computer, along with a swarm of PC clones, popularized desktop computing and soon rendered obsolete legions of typewriters, ledgers, calculators, mechanical cash registers, filing cabinets — and, in some instances, people themselves.

Hold on to your keyboards, folks, because it’s about to happen again. A new machine just demonstrated publicly — it will hit the streets by the end of this year — could well be as revolutionary as the original PC.

This novel computer — let’s call it the notepad — has no keyboard. Instead, you write directly on the screen with a special stylus. Though it weighs little more than a child’s Etch A Sketch, the notepad can read and manipulate handwritten letters, numbers, and drawings, and it packs the smarts of a high-powered PC to boot. Right now you have to print just the way you did for Miss Van Marter in the second grade, but in five years or so the notepads will be able to decipher your handwriting — at least if it’s better than your doctor’s.

Early models (expected to cost $3,000 to $5,000) will be tailored for sales and service people, who would much prefer an easy-to-handle, notepad-size computer to messy clipboards full of paper business forms. Within a couple of years, notepads will come in pocket, desk-blotter, drafting table, and blackboard sizes. They’re likely to become the next hot gadget for executives, editors, students, teachers, designers, managers, and other professionals — displacing legal pads, pocket calendars, calculators, fax machines, and even conventional desktop and laptop PCs. Market researchers bullishly predict that customers will snap up 250,000 notepads in 1992 and two million a year, nearly $3 billion worth, by 1995 — a growth rate rivaling that of the original PC.

Already, many of the biggest names in computers and software — IBM, Apple, Microsoft, NCR, and Tandy among them — are spending hundreds of millions of dollars to develop the machines. So quickly has this new genre of computer evolved that the industry hasn’t yet even agreed on a name for it. Besides notepads, the machines have been called tablets, notebooks, stylus computers, pen-based computers, pen PCs, and electronic slates.

The public got its first glimpse of the devices in late January when Go Corp., an upstart Silicon Valley software company, showed off a working prototype. Founded in 1987, Go is collaborating with IBM and others to devise a standard notepad design that any computer maker can readily clone — a characteristic that helped the original PC sweep the market. Almost everyone who has seen these slick machines agrees that they are the most user-friendly and versatile computers yet. Says Esther Dyson, editor and publisher of Release 1.0, a respected industry newsletter: ”This is the computer I’ve always wanted.”

SOUND LIKE just another gust of hot air blowing out of Silicon Valley? Not this time. For starters, notepads are incredibly easy to operate, especially for people who don’t like to type. Despite the usefulness of ordinary PCs for writing, building financial models, or tapping into databases, they require at least rudimentary keyboard skills and lots of training in the arcane commands necessary to run programs and keep track of files. Machines with graphic displays such as Apple’s Macintosh or PCs equipped with Microsoft’s Windows software simplify matters somewhat, by providing a mouse to trigger commands listed in menus. But notepad computers allow much more direct control of programs and data on the screen.

That’s because the stylus combines the best attributes of both a mouse and a keyboard. You use it not only to choose the program or document you want but also to edit or enter text or numbers. No more moving back and forth between the keyboard and the cursor keys or mouse. Tapping with the stylus on the name of a document presents it on the screen. Scrawling old-fashioned pencil- – editing symbols — ”gestures,” in notepad parlance — enables you to insert words, change spellings, indent paragraphs, or fill in spreadsheets and blanks on forms. Flicking the stylus at the bottom edge of the screen causes the computer to scroll through long documents, as though it were flipping pages.

If you don’t want to alter a document permanently, you can still scribble annotations or comments, or draw arrows and circles around passages, and the notepad will preserve them in a separate file that acts like a transparent overlay superimposed on the original. You can draw pictures as easily as on paper, and if you like, the notepad will make your wobbly lines perfectly straight, your circles perfectly round, and your rectangles and triangles true. One software company has devised a calculator that understands handwritten equations. If you write either 2 + 2 = or 2+2 the notepad will automatically give the answer.

Of course, you can also use the stylus to write memos or reports. The notepad converts your hand-printed words almost instantly into type, then formats the text into sentences and paragraphs as if you had entered it with a keyboard. Having to print rather than write may sound like a disadvantage, especially to proficient typists and people with sloppy penmanship. But experts who study such things say people adjust to printing quickly — and the machines will display spaces to help you position your letters.

Besides, contrary to popular belief, the vast majority of people can’t think up and type sentences any faster than they can print — typically 25 words a minute, says James Dao, president of Communications Intelligence Corp. The Menlo Park, California, firm has studied handwriting recognition since 1981 and has licensed software to NCR.

Finally, with the exception of word processing, most computer tasks — fiddling with a spreadsheet, calling up information from a database, or scanning electronic mail — require only short data entries, either bunches of numbers or a few words here and there. Experts like Dao say that in these instances the stylus is faster than the keyboard.

TO MAKE SENSE of things written on its screen, a notepad computer uses built-in pattern-recognition software. Users have to ”train” their machines to recognize their penmanship, a process of repeatedly writing words and characters that takes about half an hour. The screen is a liquid crystal display like those in many laptop PCs, fitted with an additional transparent layer that is a grid of very fine wires. It detects the presence of a special stylus that emits a faint signal from its tip; when you write, the screen grows darker wherever the stylus touches. The screen can also interpret control gestures made with the stylus, such as tapping and flicking. Styluses come in both wireless and tethered versions.

Behind the screen, notepads are close cousins of today’s most powerful laptops. Each will incorporate a supersmart microprocessor, at least four megabytes of memory (roughly four times as much as most PCs), and a hard disk drive or additional memory chips for permanent storage. Notepad designers have dispensed with floppy disk drives as too heavy and noisy; so to transfer programs and documents into the notepad’s memory, users will plug their machines into PCs or floppy drives back at the office. The computers can also be linked by telephone: Many notepads will contain built-in modems, and some will be able to send and receive faxes. By the mid-1990s the most advanced notepads will incorporate cellular phone circuitry so that users can get data, faxes, and phone calls just about anywhere.

”What makes this new computer so special is that when you put it in front of a computer neophyte, right away he knows what he ought to be able to do with it,” says Richard Shaffer, a consultant who publishes ComputerLetter. ”That means when these machines come out, they will have immediate appeal to a broad range of users.” Adds Esther Dyson: ”The notepad is a Rorschach inkblot of a computer. People can instantly think of specific things they can do with it.” Examples of potential uses that manufacturers foresee:

• Insurance claims adjusters will be able to carry a notepad up on a roof to sketch a diagram of hail damage. Back on the ground, they can calculate a damage estimate with a few strokes of the stylus, transmit the claim to the office via cellular phone modem, and by hooking up a small printer, issue a check to the homeowner on the spot.
• Truck drivers will use notepads filled with electronic maps and forms to plan routes, keep track of deliveries, and store customers’ signatures on receipts at the same time.
• Students will take notes in class. After class they will go to the front of the lecture hall and download into their machines diagrams and notes the teacher has written on the electronic blackboard.
• Salespeople will carry up-to-the-minute price lists, take orders, and transmit the data back to headquarters, eliminating the need for keypunch operators to copy orders from paper forms.
• Pollsters will collect survey data and tabulate it on the spot.
• Waiters will take orders and get signatures for credit card receipts.
• Architects, artists, and graphic designers will use oversize notepads to replace pencils and drafting tables.
• Journalists will take notes during interviews, and their editors will pencil-edit stories much as they did in the good old days before word processors.

And, yes, executives will love them. Notepads will be the ultimate ”little black books,” capable of storing, cross-referencing, and instantly retrieving names, addresses, phone numbers, correspondence, and calendars. They can be used to send and receive memos or review and mark up contracts, documents, and spreadsheets. Notepads will be quiet enough to write on unobtrusively during meetings.

THE SUDDEN and dramatic emergence of the notepad computer is the stuff of Silicon Valley dreams — a heady mix of nifty technology, hardball high-tech politics, strong personalities, fierce competition, and fortunes to be made or lost. At the end of the rainbow is the reward of bringing computers to millions of people who have never used them before. Stewart Alsop, publisher of PC Letter, an industry bible, marvels at the prospect: ”This is one of those exciting, almost magical times that shows off the U.S. computer industry at its best.”

Leading the charge is IBM, salivating at what it believes to be a virgin market: tens of millions of roving clipboard- and notebook-toting sales and service people who collect and use lots of valuable business data but have yet to benefit much from PCs. Says James Cannavino, the corporate vice president in charge of IBM’s PC business: ”There’s a set of users we haven’t reached yet — people who are unable or unwilling to deal with keyboard devices or who need computers for something other than traditional PC applications. That opportunity is pretty large, in fact you could say revolutionary, if we can tap it.”

Big Blue is pulling out the stops at its Boca Raton, Florida, laboratories — the same place that brought you the original PC — in an ambitious effort to introduce what it calls a tablet computer, perhaps within a year. NCR, intent on making a splash in the personal computer industry even as it maneuvers to escape the clutches of AT&T, plans to ship its notepads by fall.

Even more aggressive has been Grid Systems, a Tandy Corp. subsidiary in Freemont, California. It pioneered the notepad market late in 1989 with Gridpad, a rudimentary machine that costs only $2,400 but has to be custom- programmed to be of much use. Drug manufacturer Marion Merrell Dow has issued Gridpads to salesmen, who use them to collect orders electronically; Southern Pacific Transportation gives them to freight-yard clerks for sorting boxcars. Grid has sold 10,000 of the machines, which President Alan Lefkof jokingly calls a ”blue-collar notepad.” The company plans to launch more sophisticated models this year.

The real catalyst behind notepad computers, however, is Go, a privately owned Foster City, California, company founded by three little-known computer scientists. Chairman S. Jerrold Kaplan, 38, an expert in artificial intelligence, is the baby-faced, bookish son of a Manhattan lawyer. Employees have nicknamed him ”Poliosis” — the medical term for his prematurely gray hair. Formerly a top software designer at Lotus Development, maker of the popular 1-2-3 spreadsheet for PCs, Kaplan started Go when he realized that the screens, chips, and other components perfected for laptop computers had opened the way to notepad machines. ”Defining a new style of computer is a lot like surfing,” he says. ”If you don’t catch the wave of technology at just the right point — not too early, not too late — you’ll wipe out.”

Go’s other founders are Robert Carr, 34, vice president of software and a former top programmer at Ashton-Tate, and Kevin Doren, 36, vice president of advanced technologies, who studied computer science with Kaplan at the University of Pennsylvania. This team may be unknown, but among Go’s investors are computer industry titans: Lotus founder Mitch Kapor, Sun Microsystems co- founders Vinod Khosla and William Joy, and top venture capital firms, including Kleiner Perkins Caulfield & Byers. The company has raised more than $30 million so far. In mid-January it added another luminary when it snatched away William Campbell, one of Apple’s most respected senior managers, to be its president and chief executive. Formerly head of Claris Corp., Apple’s flourishing software subsidiary, Campbell says, ”Go has the most exciting technology of any company in Silicon Valley. I pursued them more than they pursued me.”

THE COMPANY’S not-so-modest goal is to be to notepad computers what Microsoft Corp. has been to PCs — an immensely profitable supplier of the operating system software that makes the machines tick. An operating system is the layer of software between a computer and its applications programs — word processing, spreadsheets, and the like. Each computer must have its own copy of the operating system, which makes it the most widely used type of software. Machines that share a common operating system are said to be compatible because they can exchange applications programs freely.

Go’s premise is that notepads will be used differently than IBM-compatible PCs, which rely on Microsoft’s decade-old DOS operating system. So Go decided to create a radically different operating system, called PenPoint, which among other things makes the new machines easy for novices to understand. When a notepad equipped with PenPoint is turned on, you are greeted with what looks like a sheaf of neatly stacked manila file folders. Each holds various types of documents, all listed in a table of contents. By opening a document (one tap of the stylus), you automatically turn on the program that created it.

In contrast, on a DOS PC, users must first find and turn on the program they want and then sift through lists or tree diagrams of file names to find a particular document. To help notepads work with PCs and Apple Macintoshes, PenPoint is designed to accommodate data from those machines and to store its own data in formats they understand as well. Top software companies, including Lotus and WordPerfect, the leader in word processing, apparently think the idea makes sense. More than 30 have pledged to develop applications that will work on PenPoint machines.

The key holdout is Microsoft, the $1.2 billion-a-year Seattle giant that dominates the market for PC-compatible software. As might be expected, Chairman Bill Gates doesn’t buy Go’s argument that notepads need a brand-new operating system. Stung by IBM’s decision last summer to adopt PenPoint in its first notepads, he has Microsoft racing to develop Pen Windows, a version of DOS that can be controlled with a stylus.

Gates thinks corporations that own many PCs will opt for his notepad software rather than go to Go. ”The notion that people don’t want to use the same word processors or spreadsheets as they’re currently using on their desktop PCs is ludicrous,” he says caustically. ”Pen Windows offers the really amazing benefit of adding stylus control to existing DOS programs. People won’t have to go out and buy or create whole new ones. All they’ll have to do is buy Pen Windows.”

Microsoft started developing Pen Windows in earnest only last summer, and Gates doesn’t expect to deliver it to computer users until mid-1992. He figures Go, which plans to ship PenPoint this fall, has about a ten-month head start. As the market develops, vows Gates, ”we’ll catch up.”

Officials from Microsoft and Go diplomatically claim there’s plenty of room for both companies in the nascent notepad market. Indeed, Grid and NCR — two of Go’s main allies — say they’ll also make notepads that use Pen Windows, just to be safe. But IBM’s willingness to give Kaplan and his team a chance has the computer industry buzzing that Microsoft may finally be losing its hegemony over the software market. Says newsletter editor Dyson: ”Go’s operating system is the most promising to come along since Apple’s Macintosh and deserves to succeed on its own merits — it’s that good. But there’s something else going on. A lot of people are pulling for Go just because they believe Microsoft has gotten too powerful. My prediction is that Go will succeed and ultimately become even more important than the Macintosh has been.” (Apple’s Macintosh currently accounts for a little more than 10% of all personal computers sold, compared with IBM and its clones, which account for 80%.)

Within weeks after licensing PenPoint, IBM set up pilot projects that vice president Cannavino calls ”living laboratories” at customers’ offices. One guinea pig, State Farm Mutual Automobile Insurance of Bloomington, Illinois, is thinking about issuing notepads to its thousands of agents and claims adjusters.

State Farm has long been looking for ways to eliminate or automate paperwork for the field force. Data processing vice president Norman Vincent, who is known for both canniness and thrift, balked at outfitting employees with laptop PCs for a variety of reasons. Laptops were too heavy and unwieldy for the dangerous and inaccessible places that adjusters have to inspect, such as disaster sites. Employees couldn’t hold a PC and operate it at the same time, because keyboards take two hands. Claims forms were too difficult to fill out with a keyboard and cursor keys, nor could they be easily illustrated with accident or damage diagrams. There was no way to rig the machines to accept signatures. And even in the office, agents and adjusters hated PCs because they were so hard to use.

State Farm’s pilot project is exploring how a PenPoint notepad could aid adjusters in estimating the damage to wrecked automobiles. Stored in the machine are evaluation forms, up-to-date parts and labor price lists, and parts diagrams for a typical car. To assess a wreck, an adjuster will use the stylus to do all his work onscreen — filling out the forms, calling up the exploded-view diagram of the damaged auto, marking parts that need to be replaced. The notepad will calculate damages on the spot and record the assessment for transmission to State Farm’s central computers at the end of the day. Meanwhile, the adjuster will have the authority to write the car owner a check. Current procedure requires at least two visits to the claimant and lots more paperwork. Says Vincent: ”I’ve been in this job for 20 years, and this is honestly the most exciting technology I’ve ever seen. I could easily come up with 25,000 people who could use these things at State Farm.” The giant insurer has been impressed enough to invest an undisclosed amount in Go.

What about the other big players in the personal computer industry? Compaq Computer Corp., the leading clonemaker, says it will wait to see if a market develops. Notepad makers probably don’t need to worry much about Apple, which is still trying to catch up in developing portable versions of the Macintosh. It has a notepad in the works that sources say won’t emerge until 1993; Apple refuses to comment.

Japanese computer makers, such as Toshiba and NEC, are another story. Already big players in the laptop market, they are certain to see notepads as a natural next step. As the primary suppliers of screens, batteries, memory chips, and other critical parts of laptops and notepads, they are likely to become major players right away. The chief obstacle is software. Though Sony Corp. and Canon already sell notepads in Japan that can read Japanese and Chinese characters, the pattern-recognition programs in those machines have little application to Western languages. But by following the example of their American counterparts and licensing Go’s PenPoint or Microsoft’s Pen Windows, they can make the problem melt away. Kyocera Electronics already has plans to develop a Pen Windows machine.

However the market for notepad computers ultimately evolves, one thing is certain: Such a robust ferment of competitive innovation could happen only in America. As NCR, Grid, and others rush to introduce their notepads this year, it will be one more reminder that despite U.S. failings in the automobile, semiconductor, and consumer electronics industries, nobody knows computers quite like American companies.

Reporter associate: Alicia Hills Moore