PDAs Flat; Other Devices to Shine

An IDC report says the worldwide market for handheld devices is essentially flat.
But the world looks a lot rounder when you add in wireless and entertainment devices, analysts said.

Research firm IDC said the global market for handhelds showed a 2.2 percent dip year-over-year. The sector experienced a slight sequential gain in the second quarter of 2004, but it was unable to post a year-over-year increase. According to the Framingham, Mass.-based firm’s Worldwide Handheld QView report, released Tuesday, device shipments increased 3.2 percent sequentially, but the 2.2 million units shipped in the second quarter of this year was a downer.

Gartner, on the other hand, sees the market growing by 12 percent. The difference, according to Gartner analyst Todd Kort, is the way the two firms define handhelds.

IDC’s QView covers devices that are capable of synchronizing with desktop or laptop computer; they don’t include telephony but may include wireless capabilities for Internet access and text communication. Therefore, neither the TungstenW nor the RIM BlackBerry are included in the analysis.

Kort said such devices add roughly 550,000 more units worldwide.

Kort said roughly 20 percent of all PDAs sold now have cellular capability, and the cost of adding cellular or Wi-Fi connectivity is diminishing. “I think that will be a growing trend,” he said, with most handhelds going wireless within three years. On the other hand, he said, “according to way IDC has defined the market, within two or three years the PDA market will be gone.” IDC analysts were not available for comment.

Tim Bajarin, an analyst with Creative Strategies, said the industry wont wither away. “We will continue to see a segment of the market that wants a PDA with PIM and some other features,” he said.

Creative Strategies forecasts a fairly flat PDA market, Bajarin said, while two new categories emerge: One is the handheld communicator sector, including devices that cross PDAs and phones, plus more intelligent smartphones. The other category is handheld entertainment devices. “Were intrigued with the portable media player,” he said. “That is tied to the media center, but it represents a powerful new platform that will evolve the market.”

According to IDC, although palmOne’s shipments increased only 0.6 percent year-over-year, it did achieve sequential growth of 14.1 percent, boosting its market share by 4.0 percent during Q204. IDC said palmOne’s challenge now is to maintain its recent momentum while exploiting its position only major Palm OS vendor in the handheld market, now that Sony has decided to flee the sector.

Sony slipped 1.6 percent to a market share of 7.8 percent last quarter, according to IDC, with a shipment decline of 14.6 percent sequentially and 33.2 percent year-over-year.

“We definitely expect to pick up some of the market share Sony is leaving behind,” said Stephane Maes, PalmOne senior product manager. He said customers looking for Sony features such as ease of use and simplicity would naturally gravitate to PalmOne products. At the same time, he said, “We’re definitely expanding into new channels with Zire and building a customer base of first time users.”

The Zire line began with a $99 entry level device; in April, the company added the Zire 31, retailing for $149, with a color screen, 16 megabytes of memory, an MP3 player and a photo viewer, along with the Zire 72 that includes more memory, a built-in digital camera and synchronization with Windows Outlook.

despite the multimedia features, Maes said that the Zire remains a productivity tool, even though users might also play around with them a bit. “The PDA customer is very much is buying a product to enhance or improve their lives from a personal or business productivity standpoint,” he said. “The purchase drivers [for PDAs and handheld entertainment devices] are quite different.”

Although he wouldn’t share internal sales figures, Maes disputed IDC’s dismal outlook. “Clearly there are new people coming to the category and people buying their third and fourth devices,” he said. “It’s certainly not a growing market like the smartphone market, but I don’t see it with such doom and gloom.”

Gartner’s Kort said that the Palm OS faces more competition from smartphones than from Microsoft’s PocketPC operating system, because the Palm platform and smartphones are more consumer-oriented. “Most smartphones are being purchased by consumers with their own money, rather than by businesses,” he said. At the same time, he said, the vast majority of smartphone purchases are upgrades from cell phones, rather than people swapping PDAs for them.

Kort’s personal prediction is that the PDA market will total around 12 million units in 2994, while smartphone sales will be in the neighborhood of 15 or 16 million. Those sales will be predominantly of the Symbian platform in Europe.

IDC ranked HP second in terms of handheld shipments with 24.1 percent market share for the quarter. Despite an 8.2 percent sequential drop in shipments in Q2 and a corresponding drop in market share, HP was able to increase shipments 39.2 percent year-over-year.

Fourth-place Dell suffered a 7.8 percent sequential drop, although it saw year-over-year shipment growth of 4.6 percent. But IDC expects Dell’s newest handheld, the Axim X30, to continue to build momentum in the next quarter and help the company improve its market standing.

After dropping shipments significantly in the first quarter of the year, Medion recaptured the fifth spot from Toshiba with a market-leading, year-over-year growth rate of 67.3 percent.

News Around the Web