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PDA Market Up or Down?

Gartner says PDA shipments are up; IDC says they're down. Who's right? Turns out they both have a point about the changing definitions of handheld computing devices and the market.

Research firm Gartner said 2004 PDA market numbers show that shipments grew by 6.6 percent in 2004. IDC's results said the PDA market actually declined by 13 percent in the same time frame.

Gartner's picture of the PDA market is in contrast to IDC's recent PDA estimates, which show the market is declining. But the difference between the research firms' estimates comes down to a difference in how they define the marketplace.

"The way IDC segments the market is we have mobile phones, handheld devices and a category we refer to as converged mobile devices, what a lot of people refer to as smart phones," IDC analyst David Linsalata explained to internetnews.com. "We say a handheld device has to have basic features like PIM, synchronization, application storage, things like that. But we draw the line at voice connectivity."

Gartner takes a different view of how to define a PDA and a smartphone. "There are some devices IDC classifies as smartphones that we think of as PDAs," Gartner analyst Todd Kort told internetnews.com.

Kort explained that Gartner defines PDAs as data-centric devices that may include a cellular radio. In his view, most BlackBerry users still use a cellphone and most of the bits sent and received by BlackBerries are data rather than voice traffic.

"The only RIM devices we consider to be smartphones are the new 7100 series BlackBerries, which use a phone form-factor and are designed to be used as a phone first, with data being a secondary priority," Kort said.

In IDC's definition, RIM Blackberry voice enabled devices are not counted in the PDA category, which over time will lead to an increasing discrepancy according to Gartner's Kort.

"With RIM BlackBerry shipments growing rapidly and more PDAs adding wireless capabilities, the discrepancy between IDC and Gartner numbers is growing each quarter," Kort said.

"Two years from now PDAs will probably be dead, if you accept the IDC definition. By IDC's logic, if you were to add a TV receiver card to a PC, it would no longer be a PC, but suddenly becomes a TV."

Gartner's report estimated that PDA revenues in 2004 reached a record $4.3 billion for a 16.7 percent increase, compared to 2003 numbers. Increases in shipments, as well as an increased average selling price (ASP) drove the record revenues with the fourth quarter's ASPs growing 9.4 percent over 2003 to $353 per unit.

HP led the PDA market revenue results of $1.13 billion, generated on the back of an ASP of $430. HP's 2004 estimated result represents year-over-year growth of 14.6 percent, though its market share actually slipped from 26.5 percent in 2003 to 26.1 in 2004. In terms of units shipped, HP is estimated to have grown shipments by 17.4 percent, which improved its market share of shipments to 21.7 percent in 2004 from 19.7 percent in 2003.

PalmOne's 2004 revenue declined by 9.4 percent and its market share slipped to 19.3 percent down from 24.9 percent in 2003. PalmOne still however held top spot in terms of units shipped at 3.7 million units, which was a 10.7 percent decline from the previous year.

Palm's decline in shipments also translated into it losing its crown as the leading PDA OS. Its share of the PDA OS market declined to only 36.3 percent in 2004 from 50 percent in 2003.

According to Gartner, Windows CE represented 43 percent of PDA OS shipments, which was enough to give it the top spot. Windows CE first gained the top PDA OS market share spot in Gartner's numbers in its 3Q04 results.

The big winner, according to Gartner, was Research in Motion (RIM) with a revenue increase of 236.6 percent and increase in shipments of 260.3 percent.

IDC's projections, according to Linsalata, show a "near death" for PDA's in the next 3 years. By 2008 IDC forecasts that the worldwide handheld market will ship 8.5 million, while converged device shipments will hit 130 million units.

Gartner's Kort doesn't dispute that unconnected PDA's are a declining segment.

"It is not that PIM capabilities are no longer compelling, but rather that PIM capabilities are increasingly being found in new cellphones and as users upgrade to new phones they often find that there is no incentive to buy a new PDA," Kort said.

Still, IDC's Linsalata argues that the IDC definition provides a more accurate picture of what's happening in the space.

"We think that by splitting off those devices that actually fall into that converged category we provide a more accurate picture of the growing segments and the declining segments," he said.

According to Kort though, Gartner's definition is preferred (obviously) by its end user clients.

"It would be easier for us to use a definition like IDC to make our classification easy and clean," Kort said.

"Instead, we often have serious internal debates among analysts through e-mail about how a device such as the PalmOne Treo, should be categorized. The Treo is one of the few devices that is equally adept at handling voice and data, but PalmOne calls it a smartphone and their efforts to provide full one-handed operation helped us to decide to classify it as such.

"But unlike IDC, Gartner has lots of end-user clients (rather than mostly IT vendor clients) that buy our services, and they generally prefer the way we classify devices, based on usage."