PalmOne Moves Zire Upscale

PalmOne unveiled two new handheld
devices in its popular Zire line on Wednesday, the Zire 31 and Zire 72.

While PalmOne’s Tungsten T3 handheld, released in October 2003, is a
top-of-the-line professional model with 64 megabytes of memory and a
32-bit,
400-megahertz Intel Xscale processor and a $399
price
tag, the two new Zire models work the line’s way up from the original
budget-conscious Zire. The launch model sold more than a million $99
units
in the first seven months after its fall 2002 introduction.

“The Zire 31 is still an entry-level device, but it brings in some
media
features,” said PalmOne senior product manager Raj Doshi. “The Zire 72
pushes the media capabilities and also the wireless and business
capabilities.”

The Zire 31, retailing for $149, has a color screen and 16 megabytes
of
memory. It includes an MP3 player and a photo viewer. The Zire 72, with
24
megabytes of user-available memory, adds a built-in 1.2 mega pixel
digital
camera that can take photos or video, built-in Bluetooth technology and
synchronization with Windows Outlook.

“We did a lot of research on customers,” Doshi said, “and found that
they
were using the Zire 50/50 for work and personal activities.” The Zire
31
targets the same buyers as the original: students, super-parents and
seniors. Despite the addition of media capabilities, operation remains
simple, with some fun additions. For example, PIM is jazzed up with
color
categories, an agenda view, a photo background option and the ability
to add
icons like a birthday cake to mark important dates.

The Zire 72 mixes business with pleasure, shipping with Documents to
Go,
an application for creating Microsoft Word- and Excel-compatible files.
Users can manage photos and videos on the desktop using an included
media
desktop application, then synch the results back to the device. Photos
can
be added to the PIM contact list and also inserted into Outlook
contacts on
the desktop. Both models include a voice recorder.

This pair of Zires were born into a faltering market. According to
IDC,
the worldwide market for handheld devices declined in the first quarter
of
2004, with device shipments decreasing 11.7 percent from the same
quarter
last year and a hideous 33.1 percent down from the previous quarter.

According to IDC, while entry-level devices such as the $99 Zire
helped
to grow the handheld user base, many new recruits got their
budget-priced
PDAs during the holiday shopping season, making the traditional Q1
slump
worse than usual for the whole industry. And PalmOne was hit
particularly
hard, posting a sequential decline in shipments of 38.7 percent and a
slip
in market share from 39.4 percent to 36.1 percent.

Toshiba suffered a year-over-year shipment decrease of 34.1 percent
and a
sequential decrease of 48.4 percent; Sony’s market
share
dropped to single digits on a sequential drop of 57.2 percent and
year-over-year drop of 49.6 percent; Dell remained
relatively unscathed, with only a 1.1 percent sequential decline in
shipments last quarter and a modest increase of 2.2 percent,
year-over-year,
bringing its market share up 4.7 percent to 7 percent; and HP’s shipments, while suffering a 32.9 percent sequential drop,
rose
24.8 percent over the same quarter last year, enabling it to maintain
its
25.7 percent market share.

IDC analyst David Linsalta told internetnews.com the
introduction of two new models in the hot-selling Zire line should give
the
company’s numbers a boost. “The Zire 72 is a very good product,” he
said.
“It hits its target of young professionals who want a mix of media and
connectivity perfectly.”

Moreover, Linsalata said that entry-level devices could cannibalize
sales
of higher end products. He advised vendors to keep pushing into the
enterprise, and bundling in more functionality.

Doshi wouldn’t comment on whether PalmOne plans to release an
updated
Tungsten this fall or instead plans to advance the Zire line.
He
acknowledged the possibility of Zire siphoning off sales from Tungsten,
but
said, “On one level, if it does, good, at least people are buying
PalmOne
products.” He added that the company’s market research shows that there
will
always be segmentation in the market, with some customers demanding the
look
and functionality of the Tungsten.

“If you look at where the value has been for manufacturers, it’s
been in
entry level devices,” Linsalata said, and PalmOne hasn’t yet shown it
can
get buyers to upgrade. “Whether PalmOne can take the entry-level Zire
users
up the upgrade path will be the challenge — and it always has been.”

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