PDA Sales In Position To Pick Up

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Industry analysts expect PDA sales to pick up this year after the category experienced lackluster sales in 2002.

The key growth areas will be in smartphones and models with built-in cameras, although both segments currently represent minor niches, analysts are already debating whether smartphones will quickly make the conventional PDA obsolete.

The Scottsdale, Ariz.-based In-Stat/MDR is predicting 18.3 percent compound annual growth through 2007, and Gartner Dataquest, San Jose, Calif., reports Smartphone sales in the United States will hit 1.7 million units in 2003, to 3.2 million in 2004 and 6.6 million by 2006. International Data Corp. (IDC) Framingham, Mass., said smartphone sales worldwide will jump from four million in 2002 to 100 million later in the decade.

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

"It's clearly a competitive force, but there's still a significant potential for PDAs in the Enterprise," he said. "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. Kevin Winneroski, Best Buy's business team director for PDAs and mobile computing, said the jury is still out. "The initial forays into smart phones haven't really been as strong as a lot of people thought," he said. "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, New York City, said its voice-enabled PDAs currently account for 3 percent of its PDA business, and sales continue to pick up. A buyer for Nebraska Furniture Mart, Omaha, Neb., said smartphones represent 2 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. Its latest CLIE PEG-NZ90 comes with a 2-megapixel camera and retails for $800.

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

Best Buy's Winneroski said, "The NZ90 is a homerun. Believe it or not, people are willing to pay $799, and we're pleasantly surprised." However, he believes the PDA must include a "quality" camera, such as the 2-megapixel unit in the Sony NZ90 in order to be successful.

A step down from the Sony NZ90 is a PDA with a VGA camera called the NX70. Sony said its NX70 surprisingly is outselling an identical Sony model without the camera (the NX60), even though the NX70 carries a $100 premium. Sony will bring the camera feature into its mid- and entry-level products in the future, said product manager Ty Takayanagi.

A Nebraska Furniture Mart spokesman said, "The Sony is selling okay, and I think you are going to see more and more of it. It will follow the cellphone market." The combined 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 VP of mobile computers Ken Dulaney said the interest in camera-PDA combinations stems from 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. He said, "I just think it will be one additional feature. I don't believe that it will change the dynamics of the overall PDA industry."


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