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PDA Sales Poised To Pick Up

2/28/2003 11:49:00 AM Eastern

New York - After experiencing a lackluster 2002 in PDA sales, analysts expect sales of the handheld devices to pick up this year.

In-Stat/MDR, Scottsdale, Ariz. is predicting 18.3 percent compound annual growth through 2007, industry members say the key growth areas will be in Smartphones and those with built-in cameras. Although these segments currently represent minor niches, industry pundits are already debating whether Smartphones will quickly make the un-connected PDA obsolete.

Gartner's Dataquest, San Jose, Calif., said Smartphone sales in the US will hit 1.7 million units in 2003 increasing to 3.2 million in 2004 and then 6.6 million by 2006. International Data Corp. (IDC) Framingham, Mass. said the worldwide market will see Smartphone sales jump from four million in 2002 to 100 million later in the decade.

Alex Slawsby, principal analyst for IDC, said the PDA as we know it is safe.

'It's clearly a competitive force but there's still a significant potential for PDAs in the Enterprise. In a lot of businesses, the telecom person is separate from the IT person and they don't want devices that create billing to two separate departments. My contention is that when the IT market returns to strength, we will see a resurgence in handheld sales.'

Retailers are agreeing with this line of thought. Best Buy business team director for PDAs and mobile computing, Kevin Winneroski said the jury is still out. 'The initial forays into smart phones haven't really been as strong as a lot of people thought. I know Microsoft has some really interesting initiative coming out. Some of their devices could have a chance but at the end of the day, I think people may still want separate devices. We just don't know.'

In the near term, retailers said they are looking for lower price and smaller form factors to boost Smartphone sales.

Skip Ross, Ultimate Electronics' video and wireless buyer, said, 'As the devices get a bit smaller, Smartphones will continue to gain. Right now the fully functional PDA handsets are pretty large. There are a few on the horizon which are more compact and I think that will help.'

U.S. Smartphone sales are still minimal. J&R Music and Computer World, NY, NY said its voice enabled PDAs currently account for three percent of its PDA business, and sales continue to pick up. A buyer for Nebraska Furniture Mart, Omaha, NE said Smartphones represent two percent of PDA sales.

In cameras, retail buyers are encouraged by the quick adoption of built-in cameras in cellphones. Many believe the PDA market will follow suit.

Currently, Sony is the only PDA brand with built-in cameras including its latest version, the CLIE NZ-90 with 2-megapixel camera at $800.

IDC's Slawsby said, 'I think you will definitely see other vendors offer embedded cameras. It's the hot thing.'

Best Buy's Winneroski said, 'The NZ-90 is a homerun. Believe it or not, people are willing to pay $799 and we're pleasantly surprised.' He noted, however, that he believes the PDA must include a 'quality' camera, such as the 2-megapixel unit in the Sony NZ-90 in order to be successful.

A spokesman for Nebraska Furniture Mart's noted, 'The Sony is selling okay, and I think you are going to see more and more of it. It will follow the cellphone market.' Camera/cellphones are already at 20 percent of Nebraska Furniture Mart's cellphone sales, he said while Ultimate Electronics; said camera/cellphones represent a rough estimate of about 10 percent of its cellphone sales.

Gartner's Dataquest vice president mobile computers, Ken Dulaney said the interest in camera/PDA combination stems for the huge success of camera-enabled cellphones in Japan. 'Last year six million camera phones sold worldwide and this year it is expected to reach 25 million. In other parts of the world they are selling like hot cakes. People want to take pictures and send them to people. It's cheap, easy and fun.'

But Slawsby noted that cameras in PDAs will remain a single added feature, rather than a redefining force in the market. 'I don't know if it will be tremendous, I just think it will be one additional feature. I don't believe that it will change the dynamics of the overall PDA industry,' he said.

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