July 22, 2003 3:32 PM PDT

Shipments of handhelds continue to fall

Worldwide shipments of handhelds declined in the second quarter as sales were affected by sluggish buyer demand and a traditionally slow selling season, according to a report from research firm IDC.

IDC announced late Tuesday that worldwide handheld shipments for the second quarter were down 10.7 percent, to 2.27 million units, compared with the same period a year ago. The firm attributed the decline to sluggish demand from business buyers and consumers. The second quarter is a traditionally slow selling season, but shipments in the handheld market have been shrinking steadily for some time. Shipments were down more than 21 percent in the first quarter.

Analysts have attributed the steady decline to a lack of innovation, which is limiting the reach of the devices and restricting growth beyond the enthusiast crowd that handhelds currently cater to.

"Personal information management is a killer application for 30 million individuals worldwide, but handheld devices lack an application that will further expand their appeal and differentiate them from technologies targeting similar market segments," IDC analyst Ross Sealfon said in a statement.

The firm said that the market may see a brighter second half. It cited the improving macroeconomic outlook, device upgrades and an increase in handheld shipments in the second quarter compared with the first.

Palm Solutions Group, the market leader in handheld shipments, is expected to announce an update to its Tungsten T device on Wednesday.

The hardware division of Palm shipped 903,096 units in the second quarter, giving it a 39.9 percent market share. Hewlett-Packard took solid control of the No. 2 spot from Sony Electronics, with 16.8 percent of the market. Sony had 11.3 percent, and Dell took the No. 4 spot, with 6.7 percent. Toshiba came in at No. 5, with 3.3 percent of the market.

Palm was buoyed by sales of its Zire 71, which has been the best-selling device since it was introduced in late April. HP's $299 iPaq H1910 and the introduction of five new devices in June helped the company increase its market share.

Sony was hurt by slower-than-expected sales of Clie handhelds it introduced in March. It unveiled high-end versions of the device Friday that feature built-in Wi-Fi connectivity and a new case design.

Handspring, once a major player in the handheld business, has turned its attention to its Treo devices, which are a combination organizer and cell phone. Palm is in the process of acquiring Handspring and spinning off software subsidiary PalmSource.

 

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