October 2, 2001 5:30 PM PDT

IDC: Handheld sales may be flat

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Market researcher IDC has cut its forecast for the handheld industry, now predicting that U.S. unit sales could be flat with those of a year ago.

IDC earlier predicted that U.S. handheld shipments would be 20 percent above last year's 5.3 million units. The researcher now says shipments are likely to be anywhere from flat to 15 percent above last year's levels, with the wide level of uncertainty created by the recent terrorist attacks and the shaky economy.

"It really depends on the depth to which the economy continues to sink," IDC analyst Alex Slawsby told CNET News.com on Tuesday.

Optimism about the handheld market was soaring at the end of last year as Palm and others struggled to keep up with demand. But this year has turned out to be much more sobering, with handheld makers suffering through a brutal price war and a glut of inventory.

The revised outlook, which comes as Microsoft prepares to release the latest version of its Pocket PC handheld operating system Thursday, also finds that the software giant has gained less market share than IDC had forecast.

"There is momentum with Pocket PC, but there is a lot of dependence on enterprise spending," Slawsby said, noting that corporations have been less aggressive this year in adopting handheld computers than predicted.

IDC now expects the Palm operating system, which is used by Palm, Handspring and Sony, to end the year with 69 percent to 75 percent of the U.S. market. Microsoft's Pocket PC and Windows CE operating systems, used by Casio, Hewlett-Packard and Compaq Computer, are expected to come out with 15 percent to 25 percent of the market.

On a global basis, IDC has also revised its unit growth forecast for handhelds. It once predicted nearly 50 percent growth worldwide this year but now expects roughly 10 percent to 20 percent growth above last year's 10.4 million units.

The researcher's forecasts for revenue show slightly higher growth rates, both globally and in the United States, due to higher selling prices compared with last year. The higher prices reflect the growing sales of handhelds running Pocket PC. Such devices are priced significantly higher than most handhelds using Palm's operating system.

On a global basis, Slawsby said IDC is not changing its OS market share forecast much, noting that Pocket PC has faired comparatively better overseas, particularly in Europe. Slawsby said he expects the Palm OS to command a market share in the "mid-60s," while Pocket PC will have somewhere in the "low to mid-20s."

Slawsby said he expects Palm to maintain its market share lead through at least 2005.

"Obviously, the shares will get much closer together," he added.

Wireless e-mail devices such as Research In Motion's BlackBerry are not counted in IDC's forecast, which focuses on pen-based organizers.

 

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