Handheld Devices Continue To Decline

Despite strong shipments from top five vendors Hewlett-Packard and Dell, the market continued to shrink due to a drop in shipments from market leader palmOne and the ongoing withdrawal of formernumber 3 vendor Sony. According to IDC’s Worldwide Handheld QView, device shipments decreased 4.6% sequentially and 8.7% year over year in 3Q04 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. Meanwhile, lower barriers to entry are enabling companies with established core competencies in electronics design and manufacturing to enter the market and quickly gain share, although this share comes at the expense of margins in the face of a flat or slightly shrinking market. As a result, success in the handheld market is increasingly equated with the ability to develop solutions that extend the handheld device into markets beyond core personal information management (PIM) functionality.

“In the face of intense competition from converged mobile devices capable of performing basic personal information management tasks, the worldwide handheld device market continues to struggle to evolve beyond its primary role as a PIM device,” said David Linsalata, analyst in IDC’s Mobile Devices program. “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.”

Vendor Highlights

— palmOne – Market leader palmOne experienced a decline in shipments of 12.7% year over year and 20.3% sequentially, bringing the company’s share down 6.9% points to 34.7%. The company expects stronger handheld growth in the next quarter, given palmOne’s typically strong sales during the holiday season.

— Hewlett-Packard – Thanks to a refreshed lineup across both its business and consumer portfolio, HP’s shipments increased 11.7% year over year and 22.4% sequentially. This boost brought HP to within 5 percentage points of market leader palmOne, an increase of 6.7% from the second quarter.

— Dell – Continued sales of the x30 helped Dell to increase 44% year over year and 29.7% sequentially, bringing Dell’s market share up 2.3% to 8.9% of the worldwide handheld device market. With the recent release of the x50 and the company’s strong direct-sales model, Dell looks well positioned for the fourth quarter of 2004.

— MiTAC – Similar to Medion before it, MiTAC has entered the top 5 after a relatively short time in the handheld device market thanks to a focus on quality low-cost handheld devices. MiTAC increased its shipments 1007.9% year over year and 210% sequentially, giving the company a 3.2% market share.

— Sony – As was to be expected from the company’s decision earlier in the year to withdraw from all markets except for Japan, Sony’s shipments declined 81.5% year over year and 74.8% sequentially. This decrease brought Sony’s market share down 5.8% to 2.1%.

Top 5 Vendors, Worldwide Handheld Device Shipments and Market Share,3Q 2004 (Preliminary)Rank       Vendor             3Q 2004 Shipments   3Q 2004 Market Share----------------------------------------------------------------------1          palmOne                   736,481                     34.7%----------------------------------------------------------------------2          Hewlett-Packard           648,975                     30.6%----------------------------------------------------------------------3          Dell                      188,200                      8.9%----------------------------------------------------------------------4          MiTAC                      68,500                      3.2%----------------------------------------------------------------------5          Sony                       44,192                      2.1%----------------------------------------------------------------------           Other                     436,644                     20.6%----------------------------------------------------------------------           Total                   2,122,992                    100.0%----------------------------------------------------------------------Source: IDC, October 27, 2004
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