Palm Loses Market Share to Compaq

Overall handheld shipments declined by 21 percent worldwide in the second calendar quarter of this year and Palm’s market share slipped significantly, according to a study released Monday by Gartner Dataquest.

Based on the number of units, Palm’s worldwide market share was just over 32 percent, the study said. By contrast, it had slightly more than a 50 percent market share in the first quarter of 2001.

Compaq’s line of iPAQ Pocket PC handhelds were the big beneficiaries, vaulting over Handspring’s Visors for second place behind Palm. Compaq now has a 16.1 worldwide percent market share while Handspring has a 10.7 percent market share. In the first quarter of the year, Handspring owned 15.9 percent of the market and Compaq had a 7.8 percent market share.

Dataquest credited Compaq’s success to its strong performance selling into the enterprise, which it says is just now starting to expand rapidly.

“PDA vendors that do not have a strong enterprise strategy will miss out on the bulk of market growth over the next year,” said Dataquest analyst Todd Kort.

Overall, worldwide handheld shipments fell from 3.55 million in the first quarter to just under 2.8 million in the second quarter, according to the study.

Palm is doing better in the U.S., according to the study, with a 40 percent market share in the second quarter compared to 17.3 percent for Handspring and 16 percent for Compaq.

Dataquest previously had predicted that Compaq would overtake Palm on a worldwide dollar-share basis in the second quarter. The newest study is based on unit sales and is consistent with the research group’s initial study since Compaq devices sell for roughly twice as much as Palm devices. Compaq has roughly half Palm’s worldwide market share on a unit basis in the new study.

The other Pocket PC vendor in the study, Hewlett-Packard, saw a large percentage increase in market share from 3.7 percent to 6.9 percent. Research In Motion, which has a line of devices that focus on corporate e-mail access, saw its market share decline slightly from 4.6 percent to 4.1 percent.

The study notes that, in the enterprise, Palms are seen as lower-end devices best suited for managing appointments, tasks and contacts while Pocket PC devices have more e-mail capabilities and interact better with both standard and custom office applications.

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