Graphics, Drives, and Other Components

This has been the year when mobile graphics drew within arm's length of their desktop counterparts. Today, the leading edge in mobile 3D from ATI is its Mobility Radeon X800, which sits just one notch behind the desktop X850, while NVIDIA's GeForce Go 6800 is only a few months behind the desktop 7800 GTX, which some argue is little more than an overclocked 6800 Ultra with some extra pipes. Both vendors now offer full DirectX 9 support in hardware along with all of the shading, filtering, encoding, and everything else found on performance desktop graphics adapters. And, as on the desktop, there are plenty of reduced-spec SKUs to fill in the mainstream and low-end categories, all the way down to shared memory video.

Why ATI rules mobility The Mobility Radeon X800 and X800 XT deliver up to 16 pixel pipelines for exceptionally fast PCI Express performance coupled with innovative battery-saving features, image enhancement, and next-gen shading technologies.

One of the biggest questions for whitebook sellers is when mobile GPUs will sit on standard sockets so they can be swapped and upgraded as easily as desktop GPUs. NVIDIA has been trying to accomplish this for well over a year with its PCIe-based MXM graphics module. Despite impressive prototype designs, though, MXM is still MIA. The cause may be that swappable graphics are something likely to appeal to high-end enthusiasts. As small as this segment is on the desktop, it is considerably smaller in mobile. As such, ODMs have likely been reluctant to incur the expense of a graphics subsystem overhaul just to entice a relative handful of buyers, even though moving to a standardized PCIe platform could take two months off of product development cycles.

Fastest mobile GFX yet The GeForce Go 6800 Ultra sits at the pinnacle of NVIDIA’s mobile GPU team, offering such high-end benefits as support for NVIDIA’s PureVideo image enchancement technology and DX9 Shader Model 3.0.

ATI kicked around the idea of standardized PCIe mobile graphics ("AXIOM") briefly, then seemed to back away—understandably so since the company still owns the vast majority of discrete graphics sockets in the mobile world. When we asked ATI for an update on this count, the company had no details to offer, but D&H's Dan Schwab says that ATI's road map calls for upgradeable graphics by the end of 2005. Whether that is based on a proprietary or standard socket remains to be seen, but it might counter-intuitively make sense for ATI to relax and share the bus with NVIDIA. Even if ATI's discrete mobile share dropped from, say, 90% to 50%, the high-margin profit from GPU upgrade modules might well outweight the higher volume but considerably lower margin sales of fixed, proprietary GPU chips to OEMs.

Kingston plays the center Gunning right for the mainstream, Kingston ValueRAM DDR SO-DIMMs come in 266 MHz (CL2 or CL2.5) and 333 MHz (CL2.5) varieties as well as PC-4200 (533 MHz, CL4) parts on the DDR2 side.

For our treatment of mobile hard drives, please refer back to our storage cover story in the June 2005 issue. Suffice it to say here that warranty and performance are key criteria in selecting a drive you can present to customers as a value-add. Seagate, for example, may not have the fastest drive on the market (that honor usually goes to Hitachi), but in a whitebook context, bullet points such as capacities reaching 160GB, high shock tolerance, hardware-based encryption on the new FDE models, and, most of all, a five-year warranty on all 2.5" drive models go a very long way.

Scorpio rising Western Digital’s Scorpio mobile hard drives recently debuted at 5,400 RPM and 80GB, but with impressive performance and excellent ruggedness, expect more from this line soon.

On the memory side, the same rules apply as on desktops. You can go with the most bargain basement, high latency modules around and most customers will likely never know better. Or you can buy SODIMMs from channel-friendly vendors such as OCZ, Wintec, Kingston, and Corsair. In some cases, these may not perform any better than less expensive modules from Samsung or Infineon, but the brand familiarity and lifetime warranty will carry weight both in buyers' minds as well as the bottom line.

The momentus decision Now available in capacities up to 160GB, rotation speeds of 7,200 RPM, and with a stunning five-year warranty, Seagate’s Momentus family is positioning to become the de facto drive for whitebooks.

"We're now selling more mobile components than clamshells," says D&H's Schwab. "That says one of two things. Either they're buying clamshells elsewhere, which is possible, or there's become an upgrade business for the install base that's out there today. Resellers and sometimes even end-users now feel able to upgrade the RAM, storage, or processor. That's a market we hadn't previously thought about that's kind of taken on a life of its own."

Thinking Outside the Box

It's no secret that barebones whitebook margins are relatively small. If all you're doing is selling hardware, don't expect to net more than 2% on a consistent basis. But add in accessories and the story quickly improves. The 10% you might make on a configured whitebook can quickly turn into 20% or 25% if you're savvy with your bundles and solutions. In our discussions with vendors and distributors, all agreed that accessory sales were sorely overlooked by the majority of whitebook sellers, and there's no reason for it. The smaller, lighter, and more efficient the mobile computing solution, the better the margins and customer value, and this applies as much to the notebook as to its add-ons.

The one unanimous choice among our interviewees for a key whitebook accessory was wireless networking. If you're selling a Centrino unit with 802.11a compatibility, there's a very persuasive quality story to be told around signal strength and avoiding interference from competing 2.4 GHz devices, but this would require an 802.11a-compatible router and possibly additional client adapters. If you're not tied to Centrino, you could definitely scoop the tier-ones by going with an 108 Mbps "turbo mode" Mini PCI NIC—we've seen examples based on the Atheros chips—or ditching the Mini PCI approach and going with something like a Belkin Pre-N router and PC Card package for maximum bandwidth and reception range. Limiting yourself to the usual Mini PCI card is cutting yourself out of a golden opportunity to upgrade the client's LAN.

Small laptop, big upgrade One whitebook sale with an upgraded wireless NIC could open the door to a LAN overhaul. Belkin’s Pre-N router and PC Card combo delivers signal reach and speed well beyond the 802.11 specs.

"We often tell resellers that the business opportunity here has gone in directions they cannot even imagine," says ASUS's Raymond Chen, "selling notebooks with a digital camera, with USB hard drives, printers, MP3 players. In every demonstration we do, we show the notebook being at the center of a wide range of peripherals, especially using Wi-Fi and Bluetooth as Bluetooth is now built into all ASUS white box notebooks."

It sounds a bit silly on a high-dollar sale like this, but given the rampant popularity of viewing DVDs on notebooks, a respectable set of Bluetooth headphones, such as the i-PHONO from Bluetake (www.bluetake.com), would mean no more snagged cords on coach class arm rests. Similarly, you may not make a habit out of selling MP3 players, but what if you could find one that matched your client's whitebook? The omnipresent iPod, as everybody knows, is white, but, ironically, white whitebooks are quite rare. High-capacity units from the likes of Creative and iRiver come in a rainbow of style options. Similarly, Creative and Logitech manufacture some excellent notebook USB Web cams.

USB-based disk storage is a huge product category that no self-respecting road warrior can do without. Who wants to clog up his primary notebook drive with 60GB of music, videos, PowerPoint files, backups, and such? No one, and a USB 2.0 or FireWire-based 2.5" external drive is just the ticket for keeping internal drives organized and running optimally. Companies ranging from Targus to Apricorn make such units in tough, tiny, lightweight designs. Also note that most non-Apple, hard disk-based MP3 jukeboxes can also serve as file storage drives in a pinch.

Bag it in style Carrying cases, such as this Global Executive Backpack from Targus, are a must-have whitebook accessory. This unit is replete in air cushioning, reinforcement, and practical pockets. We have yet to find a better notebook backpack.

And when the user has his whitebook and all its attendant peripherals, he's going to need a carrying bag. Bags are very competitive and, to be honest, overdistributed. End-users can often buy them at or even under distributor pricing online. Thus it becomes imperative to actually have a couple bags on hand for the customer to feel. For example, we recently looked at the Targus Global Executive backpack and were immensely impressed with the comfort and cleverness of its design, some of which simply doesn't come through in online ads or even Targus's own site. This is a great opening for a reseller to upsell in the heat of the purchase. But we should note that Targus, the world leader in notebook bags, now has a line of products designed specifically for the channel.

The best mobile audio Creative’s Audigy 2 ZS PC Card is unique in that it delivers 24-bit surround sound to notebooks as well as hardware EAX support, DVD Audio capability, and much more. This is an essential for serious mobile multimedia users and gamers.

"The Essentials line is higher-end," says Targus vice president of marketing Al Giazzon. "You won't see these models in retail or e-tail. We use better materials, better padding, and incorporated some of the benefits from the cases we developed for the large OEMs. We're the leading case supplier to the big five, and we've learned a lot about durability, drop tests, and quality. We've packed a lot of this learning into the Essentials line, which is why they tend to cost a little more and you won't see them in retail."

Hot laptop, cool lap The Antec Notebook Cooler is stylish and practical for desktop replacement and high-end thin and light notebooks prone to developing hot bottoms. The Notebook Cooler uses USB power to drive cooling fans and make computing more comfortable.

The list of portable peripherals well-suited to whitebook sales stretches on: USB hubs, power protection, network connectivity, security and anti-theft. There are a myriad of options from which you can pick and choose and offer perhaps a dozen to any given client based on his stated needs and applications. Got a gamer? Sell an Antec laptop cooling pad with USB-powered fans. An executive prone to working on red eye flights? How about one of those clip-on USB gooseneck lamps paired with a privacy overlay screen? You get the idea.

"I think accessories are really an untapped resource by a lot of dealers," says ASI's Kent Tibbils, "even the ones that have embraced white box notebooks. They miss a lot of add-on products. Like why would you buy a gaming notebook with AC'97 sound? With some of these high-end PC Cards, like Creative's Audigy, you can upgrade that and sell a good headset along with it. But we don't see resellers falling all over themselves like they should to sell these products." "Resellers can make a lot of margin selling things like the extra AC adapter and a second battery," adds Synnex's Jim Poston. "We get questions for notebook carts in schools that allow to plug in like 20 notebooks to charge. When the next class comes in, they can swap out the notebooks and charge the next round. Acer sells those and calls them Mobile Security Carts. You just can't find better value-adds than that in a large deployment environment."

Subtlety in Services

Another unanimous opinion from our industry insiders is that the best money of all in whitebooks lies in services. For instance, according to Intel, the average price on a two-year limited warranty from distributors is $85, and it's common for resellers to sell this for $150 to $189, effectively making up to 100% gross margin on this line item. Gateway charges $160 for its 3-year, no on-site, toll tech support Notebook Value Service Plan. You can undercut that in a heartbeat.

"The problem with whitebooks is definitely not the models or availability," says Joe Chang, director of product marketing development for ECS. "There are plenty of whitebooks to sell. It's just that there's no money there. The Big Five get the better pricing on software and CPUs and all that. And that's where the profit is up front. But service is where you can make the money later on. Once the warranty runs out, that service revenue is pure profit. The bigger you can make your notebook install base, the better your bottom line after the short term."

Installation is a great associated resource with notebooks. Yes, most end-users can now take a notebook home, open it, and get on the Internet, but they probably can't do it securely. How comfortable is that user with knowing the notebook he's taking home could be hacked and copied by any passing car on the street? Better have a professional lock down that risk. And while you're there, does the home have any dead spots? How about getting wireless reception all through the back yard? Sounds like a good time for an access point installation.

You can do customized notebook setup of things such as power profiles, UI tweaking, firewall configuration, and so on. There are training opportunities you can devise to make buyers more productive with their notebooks. Also, thanks to Intel, you can also make a handsome kickback by selling wireless services.

Mobile Phones Deliver Thanks to recent efforts by Intel, you can now get lucrative commissions from major carriers in addition to being able to sell software platforms and services making both smartphones and notebooks part of a broader mobile data solution for your SMB accounts.

"We see areas beyond the notebook where there is special opportunity," notes Intel strategic channel alliances manager Frank Raimondi. "One of the best is our Intel Connect and Collect Program. There are wide area networks, such as EDGE from Cingular Wireless or Sprint PCS and increasingly the EVDO from Verizon Wireless. We've enabled resellers to sell these services and the PCMCIA cards to access them. Because Wi-Fi at a hot spot is great, but for when your customer is away from hot spots, driving on the road, this service can be added to the notebook. And soon, dealers will be able to sell WiMAX services, too. But dealers need to be selling more than just a great box. What we're trying to do is make the pieces available to them that they might not be able to access on their own."

We're Not Home Yet

Lucrative and ready as it may sound, not everyone is convinced yet that whitebooks have cleared all of the necessary hurtles. Gartner research vice president Leslie Fiering believes that whitebooks will always fight an uphill battle against their complexity in assembly and because there is supposedly no value in assembling them locally when they can be built more cheaply overseas and drop-shipped affordably.

Major industry analysts have numbers showing that while notebook share is climbing overall, the growth is all going to the tier-ones while whitebooks stay flat. Old prejudices against notebook sales die hard within the channel—there's no money in it, after all—while prejudices against "cheap clones" live on in the public. In every business, there are excuses, but those who succeed don't bother with them. They're too busy selling product.

"We got involved early, which has helped," says Vince Tartalia, corporate manager of technical services with ASI, "but the channel as a whole is still sticking its collective big toe into the raging waters of mobility to gauge if it will really pan out going forward. Centrino is over two years old now, and most of our resellers are still not 100% full speed ahead pushing mobile products like they need to be. We're dedicating a lot of resources toward providing our resellers with a level of support and repair never seen before in the channel, to give them the comfort level needed to engage in this business. But I'm afraid if mobile fails in the channel, then channel resellers as well as distributors will suffer severely."

Up until recently, system builders who had to sell notebooks inevitably turned to a major OEM with a channel outlet. And it worked. You didn't make much money, but you kept your finger on the customer and the machines, by and large, were satisfactory. But an increasing number of people don't believe this strategy can persist within the channel.

"The view that it's easier to sell a brand is short-sighted," says ECS's Joe Chang. "Everybody knows that laptops are a huge market. Eventually, it's going to overtake desktops. So if you don't put some effort into persuading your customers toward whitebooks, you're going to be in trouble eventually. If you just give them an Acer or a Dell, they'll learn to trust those names and eventually go direct. This is the critical time. If you don't start selling whitebooks now, you may not have the chance later."

Vicki Chen, president of notebook integrator/manufacturer Chem USA, also points to Acer and its ilk as a channel threat, but for a slightly different reason. "With a pre-built system like Acer coming from overseas, that means there are no component sales happening here in the U.S. So the danger in buying branded systems is that they continue to erode the domestic component business, and unless the channel supports whitebooks, all that mobile component business will gradually sink toward zero."

But the good news is that an increasing number of dealers are pushing whitebooks. Intel reports over and over seeing resellers go from selling zero units to hundreds per quarter. There are several sales and support models in the market to choose from now, and sometimes resellers have to go through a miss or two before finding one that fits their business properly.

This will be the year that whitebooks grow up. Rick Roberts in our Channel Spotlight is proof of what inventive system builders can do with whitebooks so long as they keep an open mind and busy hands. There is no good reason why the histories of white box PCs and servers can't repeat themselves with notebooks, and we encourage you to weave whitebooks with add-ons and services into your line card. The road to profit in mobility is wide open.