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Are Standalone Handhelds Dying?

August 03, 2005

By Suzanne Deffree
Electronic News

Should a priest be called in to give the PDA its last rites? That is the question being posed by many in the industry after IDC last week revealed data from its European Mobile Device Market Tracker that showed the standalone handheld market had lost some significant ground in Q2 while competing converged devices saw great leaps in sales.

The firm reported that handheld devices, like the once popular PDA, claimed 21 percent of total Western European devices shipments, down from 37 percent in Q2 2004. Meanwhile, converged devices, like smart phones, grew from Q2 2004's 63 percent market shipment to 79 percent in the June quarter.

"Although GPS solutions have reinvigorated the handheld market, this is now proving a double-edged sword for established vendors such as HP and Palm, as market competition and price sensitivity have increased in parallel with the expansion of the total available market," said Geoff Blaber, research analyst, European Mobile Devices. "The proliferation of low-cost, quality integrated devices from vendors such as Acer, Yakumo, and Medion suggests Palm and HP need to add integrated GPS solutions to their respective portfolios while simultaneously reducing ASPs to remain competitive in the consumer GPS space. As a consequence, IDC predicts margins to decline further in 2005."

The IDC report was further backed by a ChangeWave Research survey of 1,809 consumers, showing interest in converged devices, especially those with calling capabilities. According to the respondents, the smart phone market experiencing explosive growth -- having surged 42 percent among consumers in the last 90 days, while sales of hybrid PDAs (a PDA without calling capabilities) have remained flat. The firm's survey also found that only 3.9 percent of respondents plan to buy a hybrid PDA in the next three months.

The standalone mobile device's remaining lifespan was questioned by a panel of consumer device executives at Tuesday's Texas Instruments Toy Tour, featuring CE devices that include TI chips. When asked if the PDA was dying at the hand of convergence, panelists agreed that convergence was a powerful source of revenue, but disagreed that standalone product makers should be picking up their black suits from the cleaners.

"Convergence is happening, but I'm not a believer that everything, therefore, will be converged," Doug Rasor, VP of worldwide strategic marketing, TI semiconductors, said. "Some people like having multiple features, I, quite frankly, like having a really high-quality camera as a separate device. That doesn't mean I still don't want a cell phone camera, but it's not an either or."

TI's public push in recent times has been for more inclusive phones that rely on 3G's high data rates for Internet, entertainment and data downloads. But Rasor reminded attendees to the New York event that 3G also allows for additional voice traffic -- a big plus for emerging markets like India and Brazil that have consumer interest in lower-end phones, but need more calling bandwidth to service residents.

"I think there's going to be a huge growth for just good old phones, especially with these new 3G networks. It will allow voice-only, very low cost phones -- a huge market."

Indeed, the GSM Association Initiative estimates initial shipments of low-cost cell phones climbing from six million to just less than 100 million per year in 2008.

Jeremy Toeman, VP of product marketing at start-up Sling Media, further stated that the convergence question becomes one of value proposition to users.

"Instant messaging on a TV just doesn't make sense. There the convergence is out of place, whereas things like having music available on this device I carry with me all the time does make sense. Is it called my cell phone or is it called my MP3 player? I don't know how I would personally label that thing," he said.

"Do I personally want a cell phone that does absolutely everything? No, I don't. Will the next generation of kids want it? Very possibly. We're must fundamentally be moving to an era where we look at the usage model and behavior patterns of what people have done and what people want to do, rather than just adding this technology and seeing if people buy it."