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Industry Mixed Over Palm Handheld Sales Report

FRAMINGHAM, MASS. – Palm’s report this week that it anticipates flat sales during the next three months, after charting 112 percent growth for its third quarter ending March 2, received mixed reaction from the industry.

Some retailers confirmed a slowdown in handheld sales, while others said sales were booming. Handspring said it is “still planning to hit our numbers,” according to a spokesman. Analysts, such as International Data Corporation (IDC), based here, said that it did not expect a huge change in the market from its original forecasts.

IDC analyst for smart handheld devices, Alex Slawsby noted, “In the next forecast that comes out in May we may make some changes, but the overall volume of the market will come back a bit later in the year. So overall the numbers may be slightly less for the year than anticipated.” He added, however, that all handheld suppliers are affected by a slowdown but Palm “got hit a little harder because of the timing.”

Palm CE Carl Yankowski stated in Palm’s earnings release this week, that the company “has recently begun to feel the effects of the deteriorating macroeconomic environment, resulting in a reduced incoming order rate amid signs of what appears to be a sector slowdown. Based on this, we believe that demand is approximately flat to the fourth quarter [ending June] a year ago in which our revenues were $350 million.”

ARS, La Jolla, Calif. suggested that Palm and Handspring may have created some of their own headaches as both companies announced new products to a great deal of media fanfare, and consumers may be avoiding the old models, delaying purchases until the new models are available. This would be particularly true of Palm, which is not releasing its new m500 until April 26 and the m505 until May 10. Both of these products have new expandability slots (SD and standardized serial/USB ports) that effectively create a new development platform for the Palm and which could render the older models obsolete.

Handspring’s new Visor Edge is available only on the Web and just beginning to ship to retailers. “Perhaps Handspring and Palm have so intensely stoked the desire for their new products that customers are no longer interested in buying until the new products become available,” said Janel Matsumoto, handheld PC research analyst for ARS.

Some industry members claimed that Palm, facing the prospect of being left with large inventories of its older products, will be the hardest hit supplier. Handspring still ships to a limited distribution and Compaq is in backorder.

Retailers report continued strong sales in handhelds. “Palm continues to be a strong seller, especially the m100. With its entry-level price, it is bringing more people into the Palm arena. All the Palms continue to sell very well for us,” according to an Amazon spokesman.

MobilePlanet, Chatsworth, Calif., which caters to the enterprise market for handhelds, said its handheld and Palm sales were also booming. “For us the business has been very strong this first quarter and we’re wondering why, against the industry trends, we have such strong sales,” said Jan Loning, MobilePlanet Chairman and CEO. He said the company’s overall business is up 50 percent this quarter over the same period last year, with PDAs and accessories representing the majority of sales.

A Midwest regional chain store buyer noted, “I’m right on track; I’m going to hit my plan with Palm and haven’t seen any delaying on the part of consumer sales. The m100 [is] my best seller.”