Tough Times Ahead for PDA Market
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IDC has predicted the smart handheld device market is set to face lean times.

Its recently released Q106 results for the Australian smart handheld device market reveal that pen-based and converged categories contributed to a fall in shipments. IDC’s report concluded that Pen-based shipments fell by 18.6% sequentially while the combined converged market fell by 1.5% compared to 4Q05. Converged devices accounted for 93.0% of all smart handheld device shipments during the quarter.

In addition, IDC has found the following key highlights of the 1Q 2006 smart handheld device market:

1) Entry-level market depletion: Overall pen-based shipments are expected to dwindle and continue its escalated descent, and there will continue to be limited demand from end users seeking basic devices with Personal Information Management (PIM) functionality at affordable prices. Currently, these low-end devices are performing well in low-cost retail channels. However, with converged mobile device functionality increasing and prices dropping, users interested in entry-level mobile devices will opt for a converged mobile device instead of a handheld device.

2) Search for new functionality continues: Pen-based or PDA device vendors have failed to breathe new life into their devices despite innovations such as integrated GPS and hard drives that aim to offer innovative usage models beyond the traditional PIM functionality. Despite the rising attach rates with new technology, net growth continues to be elusive to these vendors. In contrast, converged devices that also offers PIM capability lessens the pen-based device vendors’ ability to leverage PIM as a competitive advantage.

3) Price sensitivity: The expectation for lower pricing by end users has the potential to force device vendors into a downward spiral of lowered prices and thinner margins. Although this would appear to affect both handheld device and converged mobile device vendors equally, converged mobile device vendors will escape part of the pain by selling their devices at full price to a carrier that swallows the discount cost of the subsidy. Meanwhile, without another party to take the brunt of the discount, pen-based device vendors will face increasingly smaller margins and tougher sales if they want to stay price competitive with converged mobile device vendors.

Market Analyst, Mercie Clement, said “In terms of vendor rankings for the total smart handheld device market, Nokia continued to be the dominant player, accounting for 77.1% share of total shipments in the quarter. Both Research in Motion (RIM) and i-mate finished the quarter in second place, with 4.9% share. HP finished the quarter in the fourth spot, with 4.1% share of all handheld devices shipped during the quarter and rounding out the Top 5 was O2 with 3.9% share.”

Top five vendors (total smart handheld device market):

Nokia 77.1%
RIM  4.9%
i-mate 4.9%
HP  4.1%
O2  3.9%