April 27, 2004, 12:50 PM — Shipments of personal digital assistants (PDAs) continued their steady fall in the first quarter of 2004, as a stronger than usual seasonal dropoff in shipments added weight to an ongoing decline.
Handheld device vendors shipped 2.2 million units in the first quarter, down 11.7 percent from the first quarter of 2003, and 33.1 percent off the fourth quarter of 2003, said David Linsalata, an analyst with IDC in Framingham. Many people who were planning to buy a PDA decided to buy amid the fourth-quarter holiday shopping season rather than waiting until the first quarter, he said.
IDC defines a handheld device as a pocket-sized device such as a PDA that is capable of synchronizing with a PC. This includes devices that can manage and store data or connect to the Internet through expansion cards or built-in chips, but excludes devices with voice capability.
Shipments of entry-level PDAs such as PalmOne Inc.'s Zire device and Hewlett-Packard Co.'s (HP's) iPaq h1940 have increased as those companies have focused on the low end of the market, Linsalata said. However, the profit margins on these devices are not as strong as their high-end cousins, which face competition from sophisticated cell phones and smart phones, he said.
Analysts have been warning PDA vendors for several quarters that consumers and business customers have lost their taste for stand-alone PDAs that manage contacts and calendar information. Instead, high-end buyers are increasingly intrigued by new cell phones that have improved personal information management (PIM) capability or smart phones that combine a cell phone with a powerful PDA operating system such as PalmSource Inc.'s Palm OS or Microsoft Corp.'s Windows Mobile, Linsalata said.
To compete with these new cell phones, PDA vendors must build wireless Internet capabilities into their devices or offer support for unique applications such as GPS (Global Positioning System) tracking or movie players, Linsalata said.
PalmOne's Treo 600 smart phone has been its fastest growing product, with shipments increasing 37 percent from PalmOne's second quarter to its third quarter, which ended in February, according to PalmOne's third-quarter results. However, shipments of PalmOne's core handheld products slipped 38.7 percent from the calendar fourth quarter of 2003 to the first quarter of 2004, IDC said.
PalmOne still leads the overall market with 36.1 percent market share, and is especially sensitive to seasonal fluctuations since it has a strong presence in the consumer market, Linsalata said. The company is expected to introduce two new Zire PDAs for consumers in this quarter, which will help it improve shipments of its PDAs, he said.
But PalmOne has also served notice that it plans to reorganize its company around the smart phone expertise it acquired from Handspring Inc.