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Smartphone Sales On Pace To Overtake PDAs

9/20/2004 02:00:00 AM Eastern

Retailers say they are feeling the pinch in PDAs, confirming what industry pundits have been claiming, that smartphone sales are encroaching on the market and may overtake PDAs on a worldwide basis by next year.

A report by In-Stat/MDR, Scottsdale, Ariz., said smartphone shipments will take off dramatically in 12 months to 18 months, resulting in a compound annual growth rate of 44 percent over the next five years.

In-Stat said current growth is being fueled by smaller, more convenient phones, falling prices and better integration of voice, e-mail and PIM functions. However, prices are still high enough to hinder the market over the next year.

While agreeing that smartphone sales are soaring, IDC, Framingham, Mass., said much of that growth, at present, is somewhat accidental.

“The biggest share of the smartphone market is Nokia Series 60 and 80 phones, and the majority of those are being sold to people who don't understand they are buying a smartphone. There's a lot of 3650s sold in the United States, and people buy them because they view them as a better camera phone — where it's easy to take a picture and send it over an MMS,” said Kevin Burden, IDC's research manager for smart handheld devices. He said the Nokia Series 60 phones account for more than half the market worldwide.

One East Coast retailer said, “In total, PDA sales are down. There's nobody left on the Microsoft side besides Hewlett-Packard. Even Sony backed out on the Palm side.”

A Midwest regional retailer said PDA sales have suffered a double-digit drop-off starting five months ago. However, if you include smartphone sales, then the total category is flat, he claimed.

Said the buyer, “People who own smartphones love them and wouldn't trade them for the world, and they tell relatives and friends. Instead of paying a couple of hundred bucks for a good PDA, they go to a smartphone.”

Smartphone prices range from $199 to $599.

The buyer also mentioned that the new video streaming technology available from Sprint PCS and AT&T Wireless, which allows users to watch TV on their cellphones, could spur sales of smartphones, as they have larger LCD displays. “You got a guy sitting in the airport who wants to watch an episode of 'Friends.' He's going to want to do that on a larger screen than on a little cellphone. So I think the TV technology will make that business even larger.” the buyer said.

But some regional CE chains have been reluctant to carry smartphones, such as RC Willey Home Furnishings, Salt Lake City, which sells the HP iPaq 6300 only in the Las Vegas market. “They just haven't sold well for us yet. People need to get used to a little bigger phone, but I think this is the way the market is going to go,” said Adam Davies, cellphone buyer. He said RC Willey is planning to sell the Blackberry in the future.

According to IDC, the worldwide PDA market totaled 10.5 million devices in 2003, down from 11.6 million in 2002. Smartphone or “converged devices” rose from 2.8 million units in 2002 to 9.4 million in 2003.

IDC expects a further decline in PDAs in 2004, while noting, “the market will get to a point where it stabilizes,” said Burden. In the United States, the PDA decline is even steeper. U.S. sales are forecast to drop from 4.9 million in 2003 to 3.5 million in 2004 and 2.7 million in '05, said IDC.

U.S. smartphone shipments, by contrast, are expected to rise from 1.9 million in 2003 to 4.8 million in 2004, to 9.8 million in 2005, said IDC.

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