The not-doing of Java: Zen and the art of US Robotics

We’ve held US Robotics (USRX) in our StockWatch Portfolio since we kicked off this summer. At the time, I did an electro-mumble about increased demands for bandwidth and desktop growth, later watching the stock tumble on news of slowing demand. US Robotics is best known for its high-speed, mass-market modems, but it also makes video conferencing equipment for the commercial market and has introduced a new line of PDAs under the “Pilot” brand name. USRX poses something of a paradox from the Java perspective: The company hasn’t publicly stated any direction with regard to Java, but its not-doing of Java is offset by its excellence in providing the connectivity that Java desktops of all flavors require.

Modems have fallen into the same flat pricing/better performance trend that CPUs, desktop PCs, and Unix workstations have followed for years. The going rate for a mid- to high-end data/fax modem is about 00 at your favorite mass market retailer. Last year it bought you a 14.4-kilobit-per-second (kbps) modem; this year it gets you 28.8 kbps and in some cases, even a 33.6-kbps pump. Distant early warnings of 56-kbps modems have been sounded, making me think that we can go through another doubling of the price/performance ratio in the next 12-18 months. So where’s the good news?

Let’s look at the cost of owning a modem over the course of its useful life. Figure you get a year out of your gear before you feel the need to upgrade; at 00/unit that’s less than the cost of a can of soda per day. Beverage companies get the nod because their products are continually used up, re-generating demand. I think we’re about to see the same realization in the modem space — the cost of buying the latest and greatest technology is not much more than that of your daily trip to the vending machine or (in my part of the world) Diet Coke for breakfast. Modems are disposable; users should give in to their cravings and treat their modems like commodities, not capital investments. Making the mental switch opens up a floodgate of demand from consumers who purchased last year’s pre-installed 14.4-kbps modem.

How much can Java drive that need for speed?

Java applications don’t require a whole lot of bandwidth once they’re loaded and running. Interacting with a locally run applet is certainly preferable to the constant yammering of a server-push GIF animation, although the latter drives demand. Loading the Java applet, however, remains the largest time component of startup for users on dial-up networks. Lopping 50 percent or more off of the download time should start a virtuous circle: Users will be comfortable visiting more Java-enabled Web pages, and page designers will more freely use larger Java applets without fear of being branded a “modem killer” site. So there’s one vote for USRX to enjoy a second-order effect of widespread Java use.

But what about the PDA part of the business? It’s decidedly not-online and not-Java, giving US Robotics a bit of a Zen appeal. Here’s the pitch: If Java applets drive demand for modems, Java computing drives demand for easy-to-use, highly portable PDAs like the US Robotics Pilot. Confused? Think about the themes of “Java Computing” espoused by Sun during last month’s product launch: recentralization of data, more control in the network, moving data and complexity off of the desktop. All things I agree with, and all the reasons I keep my money in a bank and not in a glass jar in the bedroom.

But consider the similarities between the money-in-the-bank scenario and that of a dataless, highly controlled environment like that envisioned with Java desktops: You still have some small amount of short-term, completely private state. In the banking world, it’s my wallet with this week’s cash stash, my shopping list, some receipts, and a few Post-It notes with to-do items. In the office, it’s a notepad that I can take to meetings, a place to scribble to-do items for the day, or a Post-It on which I note an interesting URL to visit later on. This kind of state information is too short-lived to warrant network backup or the reliability of centralized control. It’s private, and doesn’t need to be pushed or shared over the network. It’s the perfect kind of data to sit on a PDA. Consider it the necessary corollary to Java computing — you’ll need a place to keep your private state information.

Enter the Pilot. USRX has introduced a PDA that’s small enough to tuck into a pocket, and simple enough to make it a good substitute for the Post-Its and logo-emblazoned notepads that seem to proliferate around all of my on-line access points. When I first started following USRX over the summer, a few California friends mentioned the Pilot and the difficulty of finding them on the left coast. Other associates in Texas had good supply, but little demand. Six months later, I’m seeing Pilots show up in meetings on both coasts, and I think this could be the start of a trend. USRX certainly hopes to ride the holiday gift-giving tide, recently cutting Pilot prices and publicly projecting a promising next quarter.

USRX has had a bumpy ride since we started following it in July. A great upswing, followed by a major sell-off, now reversing into a new upward trend have formed the basis for what some money managers call a “catapult” – the pullback putting “potential energy” into the stock for a rocket shot forward on good news and product momentum. I’m in for the ride.