January 20, 2000 12:45 PM PST

Study: Handheld sales up 169 percent

Lots of small packages were delivered this past holiday season as sales of palm-sized devices skyrocketed in December, according to a new report.

December retail sales Top 5 PDA makers of personal digital assistants (PDAs) grew by a whopping 169 percent over the same month a year ago, according to a survey by retail market analysts NPD Intelect. Although desktop and notebook computers saw double-digit gains, holiday shoppers apparently could not resist the appeal of portability.

The bounding popularity also came with an increased stratification in the market. Although several personal organizers are fairly inexpensive, consumers also bought devices that cost as much, if not more than, low-end PCs in growing numbers.

"Consumers are willing to pay a high price for the total mobility of personal digital assistants," Sima Vasa, vice president of technology products for NPD Intelect, said in the report. "They're paying $700 for high-end PDAs when it's possible to buy a complete desktop PC for about the same amount. People rely on the new functionality of handheld devices for easier, more efficient completion of the same tasks formerly reserved for desktop or notebook PCs."

The news is particularly good for the major handheld manufacturers such as Palm Computing and Casio, as well as for computer stores, which have been nervously keeping an eye on online sales and their potential to cannibalize traditional retail profits.

Handheld devices are now more compelling in terms of functionality, and there are far more options and price ranges available than there were last holiday season. Since last year, market leader Palm Computing has released several models ranging in price from $200 to $600, and major players such as Compaq, Casio and Hewlett-Packard have all stepped up their efforts.

Whereas last year's PDA offered basic organization and contact management help, this year's device allows users to capture digital images, play digital music, access the Net wirelessly, and send and receive emails--and often faster and with less hassle than using a desktop PC.

Among handheld manufacturers, Palm added to its leadership position, gaining 8 market share points to take 73.6 percent of the retail market, according to the report. Casio, which makes the most popular of the Microsoft Windows CE-based devices, the Cassiopeia, along with several low-cost organizers, came in a distant second, with 17.4 percent of the market.

Relative newcomers Compaq and HP made the top-five list in part because of missteps and defections from established players. Those included Royal, which makes the daVinci device, and Philips, which decided to leave the Windows CE market last year, the survey found. Royal was forced to stop distributing the DaVinci because of a technology infringement lawsuit filed by Palm Computing.

But PDAs weren't the only products flying off the shelves. Sales of notebook and desktop computers also rose significantly in December, the report said. Notebook sales increased by 25 percent, and desktops were up 19 percent compared to last year.

Among computer makers, Compaq Top 5 PC makerswas number one, followed by HP, Emachines, Apple and IBM, according to the report. Emachines saw particularly significant gains, shipping 167,000 machines this year, up from 26,000 last December.

"This brand took off because it was the first of the 'bargain PCs' to hit retail channels, selling machines at the $500 price point long before any of the big names," Vasa said in the report. The study focuses only on retail sales and does not take into account sales of direct manufacturers like Dell or Gateway, or even direct sales by Compaq.

The increase in PC sales is also good news for retailers at a time when more attention than ever is being paid to online sellers.

PDA sales specifically are a bright spot for retailers. Although many Palm products are available for far below retail price on the Net, electronics stores saw their market share increase from 63.6 percent to 70.8 percent among all retailers.

"Consumers have shown the industry they'll pay for products that match their fast-paced, mobile lifestyles," Vasa said.

 

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