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Handheld Market Picture Brightening Say Retailers

Consumer Electronic retailers say handheld sales are running slightly ahead of last year with reports ranging from flat to 15 percent up. A brighter than expected December and January has, additionally, led some retailers and analysts to predict a stronger than anticipated second half in the category.

Best Buy said its handheld unit sales were up this year although dollars are close to flat. According to buyer Jason Bonfig, “We saw a slowdown in the growth in May of last year and then things rebounded for the holiday and now its back to prior to that.”

Alex Slawsby, principal handheld device analyst for International Data Corporation, Framingham, Mass., said a number of positive factors are encouraging the firm to revise its 2002 forecasts. “There was the thought that this year would be flat or a bit up from last year, but this year will be a little brighter than we thought. It’s looking up a bit given the new products and wireless functionality that is becoming available. There is some new potential there.”

IDC’s new forecasts are expected to be released this week.

Retailers said the strong Christmas season has resulted in product shortages, which have continued. “There’s been some pretty decent struggles in getting the PocketPCs because they use a higher memory and higher quality screen and these components have been short as an industry. Everyone was so surprised at how well December was so we had to chase for the product. We still have continued problems with HP and Compaq. Its basically the same thing seen in notebooks and desktops with memory shortages,” Bonfig continued.

R.C Willey, Salt Lake City, said it has problems getting adequate Palm supplies through distributors and noted that Sony supply could be better. “As in computers, Sony maintains a conservative production schedule,” said buyer Rex Leetham.

Rob Eby, purchasing director for D&H Distributing, Harrisburg, Pa., added, “Availability was tight in Christmas but things have gotten better since then. That was for handhelds across the board. My personal theory is that a lot of people had disposable income that they were planning to use for a trip and, being it was so close to Sept. 11, that people used their money for other things and a lot of that went into CE products, from DVD to handhelds.” He said there is about a three-week backorder on Compaq.

Eby added that D&H, which is one of three Palm distributors in the U.S., said he is currently up 15 percent in handhelds over last year and that he expects continued double-digit increases for the second half, with increased sales in wireless and enterprise type products such as the new Palm i705.

In addition, many CE retailers say that Sony has been a shining star for the category with sales for the brand up as much as 40 percent at some retailers.

“Sony’s gotten very big,” said Steve Giblin, buyer for J&R Computer World, New York. “They came out with very attractive units at a competitive price. Sony’s the type of company where it takes one or two rounds for them to get it right and then they go after the market as they did in notebooks.” Giblin said Sony sales started picking up last August.

Ultimate Electronics, Thornton, Colo., said Sony represents about 60 percent of its handheld business, up from 30 percent last year, according to merchandise manager Chuck Wagner. He noted, however, “We’re a CE retailer so the connection with Memory Stick and the synergy with other products has a big impact. We do a good business with Sony camcorders and digital still cameras so the Memory Stick storage means a lot to our salespeople and they push it.”

Similarly Ultimate Computer Strategies, Monsey, N.Y., said CLIE sales have jumped by about 40 percent in the last two months.

Several retailers also noted that they are planning to carry the new Sharp Zaurus, which is expected to begin shipping shortly, with ads breaking in mid April.