Mobile Enterprise in Flux

SAN FRANCISCO -- Two reports issued this week point to a mobile enterprise industry that has found itself in transition.

The CTIA Wireless Association offered a rosy wireless picture with news that the number of subscribers grew by 21,401,569 (14.5 percent) between June 2003 and June 2004. The organization's Semi-Annual Wireless Industry Survey also found a wireless industry that is experiencing a 17 percent increase in cumulative capital investment -- up more than $22.5 billion. As of June 2004, total cumulative capital investment stood at over $156 billion.

The survey also showed that nearly 27,000 cell sites had been constructed in the previous year, an increase of 18 percent. The trade group reports more than 174,000 cell sites in the United States alone.

"Not only are more people choosing to join the wireless network, but those customers are also choosing to spend more time on expanding it," CTIA President and CEO Steve Largent said during his keynote here. "This is an industry that is serious about re-investing in its core business."

Largent also said more people are using their wireless devices for longer periods of time. The CTIA report found more than 500 billion wireless minutes were used in the first half of 2004 -- an increase of 35 percent between June 2003 and June 2004.

But reports of strong growth in usage and backend investments is tempered by a study issued this week showing a decline in handheld sales for the third straight quarter in a row.

Despite strong shipments from top five vendors HP and Dell , IT research firm IDC said the market continued to shrink due to a drop in shipments from market leader palmOne and the ongoing withdrawal of former No. 3 vendor Sony. The survey also found device shipments decreased 4.6 percent sequentially and 8.7 percent year over year in the third quarter of 2004 to 2.1 million units.

"Consolidation in the worldwide handheld device market continues with the exit of top vendors Sony and Toshiba from international competition nearly complete," IDC said in its report.

IDC's analyst suggests success in the handheld market is dependent on making it more than just an address book and calendar.

palmOne experienced a decline of 12.7 percent over last year, but still expects stronger handheld growth in the next quarter, given its typically strong sales during the holiday season and the introduction of its new Treo 650 this week.

"It is crucial that vendors push handheld devices into new market segments through the integration of existing technology, such as GPS bundles, in order to energize this market and return it to a growth path," David Linsalata, an analyst in IDC's Mobile Devices program, said in a statement.

One vendor that is gaining from consolidation is Microsoft . The company is solidifying its position as the No. 2 software vendor for PDAs and smartphones with its Microsoft Pocket PC and Smartphone operating systems.

A new study from ABI Research, entitled "Wireless Handset Software," suggests that market leaders PalmSource (PDAs) and Symbian (smartphones) are continually looking over their shoulders to see gains from Redmond. The departure of Sony and Toshiba is also helping fuel a surge in HP and Dell PDAs -- two strong Microsoft supporters.

Microsoft announced a multi-pronged attack this week with support from T-Mobile's HP 6375 offering, Motorola's MPx-220 courtesy of Cingular, and the Sprint PCS Vision Smart Device PPC-6601. The software giant also extended its backend support for Exchange Server, SQL Server and Office, along with new Visual Studio developer tools and third-party software support from HP, Accenture and Dextera.