By Brier Dudley

Seattle Times technology reporter

Friday, March 3, 2006 - Page updated at 12:00 AM

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Microsoft: EU boosted rivals

It`s not a Microsoft iPod or a handheld Xbox, but the mysterious device Microsoft is unveiling next week may still catch the eye of gadget-obsessed consumers.

Called the Ultra-Mobile PC, it`s a new type of portable computer that`s about the size of a paperback book but runs a full version of Windows.

Computer makers are expected to start selling the tiny PCs this year for $500 to $1,000 using designs developed by Microsoft and Intel. Microsoft has told hardware companies it expects sales to grow at a rate of 40 percent through 2008, nearly double the pace of big laptops.

Microsoft has a mixed record developing handheld devices, including the Portable Media Center in 2004, which was eclipsed by Apple`s iPod. But one analyst who has seen the little computers said they have potential if they are priced low enough.

``The difference is the discussions are around $500 price points,`` said Bob O`Donnell, vice president of client research at IDC. ``If you do have a device at $500, that becomes a lot more interesting — that becomes a gadget. People spend that much for an iPod.``

Microsoft is also trying a craftier marketing approach. It built buzz with a coy Web site, OrigamiProject.com, which promised to reveal the project next Thursday. But details have been trickling out elsewhere online, including a Microsoft video showing an early prototype of the device.

Thursday, the company confirmed it`s going to present the Ultra-Mobile PC next week at the CeBIT trade show in Germany. Intel plans to present the devices at its developer conference, also next week, in San Francisco.

Before they began building buzz, Microsoft and Intel candidly discussed the projects with computer makers at conferences in Seattle and San Francisco last year.

The two companies are trying to create a new category of device, between a laptop and a smartphone, that takes advantage of smaller PC components, improved software interfaces and near-ubiquitous wireless Internet access in some regions.

If the devices are convenient, cheap and sexy enough, they could help the PC titans accelerate sales in North America, Europe and Japan, where the computer market is saturated.

They are positioning the Ultra-Mobile PC as something that fits in a purse or a glove box, and can be used to casually do e-mail or visit a Web site from the couch or coffee shop without firing up a PC.

It`s intended to supplement, not replace, the PC.

The devices will not compete directly with Apple`s iPod, but it will include media player software and the capability to store as much or more digital music and videos.

Microsoft has described the devices as a ``carry-everywhere form factor.``

Its vision was for full-power PCs that cost $500 to $800, run all day on batteries, are constantly connected to the Internet, weigh less than 2 pounds and have 5-inch to 8-inch screens.

But the first attempts are likely to fall short of these goals, especially battery life. Intel is developing a new low-power chip set just for the devices, but it won`t be ready until next year.

The devices being unveiled next week are based on the Centrino notebook platform and run for a few hours on batteries.

``It`s really category-creation mode this year,`` Intel spokeswoman Amy Martin said. ``The first examples are going to be out there; they`re not going to fulfill the vision of being an inch thick or under a pound or all-day battery; that will be over time.``

They are also devices based on Windows XP, which will be replaced in late 2006 by Windows Vista. A Microsoft spokesman said that some but not all of the Ultra-Mobile PCs being unveiled next week will be upgradeable to Vista.

``Windows XP is still going to be out there in the market, and this is the first iteration of a device,`` spokesman Josh Kerwin said.

``This doesn`t necessarily mean it won`t run Windows Vista at a later date.``

Handheld PCs have been around for several years, but high prices and limited availability kept them an exotic, niche product.

They include a 5-inch wide model sold by San Francisco-based OQO for $1,899 and the FlipStart developed by Microsoft co-founder Paul Allen.

FlipStart was supposed to sell for around $2,000 but never went on sale. Spokesman Michael Nank said it`s still being developed.

``We`re looking at some of the different options and we`ll see what happens,`` he said.