2 May 2004

Worldwide handheld device shipments decline 12% from 2003 in the first quarter of 2004, according to research firm IDC.

The worldwide market for handheld devices declined in the first quarter of 2004 due to seasonally sluggish demand and vendor re-focusing, according to research firm IDC's recently issued Worldwide Handheld QView. Device shipments decreased 11.7% year-on-year in the first quarter of 2004, and dropped sequentially 33.1% to 2.2 million units.

While vendor commitment to entry-level devices at lower price points has helped to grow the handheld user base, IDC claims many would-be handheld purchasers obtained their devices during the holiday shopping season in the fourth quarter of last year. As a result, despite growth in the European market, the seasonal slump hit vendors particularly hard during the first quarter of this year. IDC also said the market was also strongly impacted by a number of vendors focusing on trimming down their product offerings and clearing their channels in preparation for spring product launches.

"Despite increasingly powerful handheld devices reaching market, the consumer uptake of entry-level devices available from nearly every vendor calls into question the upgrade path and value posed by the high-end devices. If entry-level devices prove to be the most successful products adopted by consumers, the long-term impact could be acceleration away from hardware differentiation and a further loss of value in the handheld industry," said David Linsalata, analyst in IDC's Mobile Devices program. "Handheld device vendors must continue to search for consumer and enterprise solutions for their products, such as GPS device bundles, that utilize the range of capabilities contained in a handheld device."

palmOne was according to IDC hit particularly hard by the seasonality of the handheld market, and posted a sequential decline of 38.7% and a corresponding decrease in market share from 39.4% to 36.1%. However, with the announcement of the company's new Zire 31 and 72 models yesterday, combined with the fact that the Zire family has surpassed 3 million units in fewer than 18 months, palmOne's shipments are expected to increase in the near future.

Despite the declining handheld market and a 32.9% sequential drop, HP posted the strongest year-over-year increase among the top 5 vendors with a rise of 24.8%. This increase, based on the strength of an array of devices hitting the entire spectrum of price points, enabled HP to maintain its market share position of 25.7%.

Meanwhile, caught in the middle of a strategy shift to a streamlined set of products and a focus on improved PIM and other core handheld applications, Sony's market share dropped to single digits on a sequential drop of 57.2% and year-over-year drop of 49.6%. Dell, on the other hand, experienced only a 1.1% sequential decline in shipments, the lowest drop among the top 5 vendors, benefiting from a fiscal year-end sales push in January as well its direct sales model. Seasonality did take its toll, however, as the company only increased 2.2% year-over-year, bringing its market share up 4.7% to 7%.

Despite a relatively lackluster first quarter with a year-over-year shipment decrease of 34.1% and a sequential decrease of 48.4%, Toshiba reentered the top 5 vendor list this quarter. Toshiba, a constant member of the top 5 vendors since the third quarter of 2002, was knocked out of the top 5 vendor list last quarter by newcomer Medion's strong sales. Medion did not, however, repeat last quarter's performance.