The iPaq is selling via online auctions for hundreds of dollars over the estimated retail price, as customers choose not to wait for its appearance on retail shelves. Other in-demand products before the iPaq, like handhelds from Palm, have also fetched auction prices well above list.
The iPaq, unveiled in April along with devices from Hewlett-Packard and Casio, is based on Microsoft's Pocket PC operating system for handheld devices. Slated to begin shipping in early June or July, the iPaq has been anxiously awaited by gadget aficionados--many of whom deem it the coolest of the Pocket PCs.
As reports of devices trickling into retailers have surfaced, frustrated buyers are turning to the only outlet for the product: online auctions. The iPaq is selling for $700 and $800 on eBay and Amazon.com auctions, despite the estimated retail price of $499.
"The demand has just been overwhelming for this product. We're behind the curve," said Nora Hahn, a spokeswoman for Compaq, adding that she has seen iPaq prices as high as $1,000 on eBay.
Currently, most online retailers say they are out of stock. That includes companies such Onvia, Computers4Sure, PCZone, Egghead, CDW, NECX and MicroBase.
So buyers are turning to nonretail outlets like eBay, where lucky owners of the iPaq are taking advantage of the situation.
"It's the simple economic theory of supply and demand," said Zachary Kerr, who bid over $700 for an iPaq on eBay. "They exist in limited quantity. And I am one of the unfortunate souls who just doesn't own one, but wants one and can't wait to have one."
Many handheld enthusiasts have turned to online auctions and message boards only after numerous attempts to purchase through a traditional retailer.
"I can't locate the iPaq anywhere, including major and small online and offline stores," said Frank Yeh, who also bid on an iPaq at eBay. "Unfortunately, I sold my Palm Vx thinking that I would get an iPaq soon. I was wrong. If I have to pay $200 over the (retail price), I have no choice."
Microsoft is wasting no time in claiming that the overwhelming demand is an indication that its fortunes have shifted in the handheld market, which it has yet to crack. Others see the situation as indicative of the ongoing problems both Microsoft and its partners have had managing retail inventory and product releases.
Hardware makers have wrestled with inventory problems ever since the debut of handhelds based on the Windows CE operating system two years ago. The first round of devices with color displays, expected early last summer, were delayed because of supply problems with the color screens.
Microsoft-based products were in short supply in many retail stores last holiday season, as manufacturers and retailers geared up for the release in April of Pocket PC--a new name for the latest version of the Windows CE operating system for handhelds.
Only HP shipped a totally new product at the same time as Pocket PC's introduction. Casio, whose Cassiopeia was the top-selling Windows CE device last year, shipped an upgraded version of its older product.
At the same time, rival Palm, whose products account for roughly three-quarters of the handheld market, was grappling with supply issues of its own. Its more popular Palm devices, including the sleek Palm V, were also being sold on eBay for prices much higher than the official retail cost, because the company was having a difficult time getting its hands on enough flash memory and displays to supply retailers.
Buyers and sellers express frustration with Compaq and Microsoft for the situation.
"I am a little surprised that Compaq is allowing this to happen; they should have been able to produce quantity," said Kevin Bayless, who is selling iPaqs he acquired when he unexpectedly received an extra order of the device.
"I feel that Compaq should have been able to fill the supplies," Yeh said. "It's a very negative case, where they're not only hurting the potential of positioning Compaq as a leader in the emerging PDA (personal digital assistant) industry...but also hurting a lot of want-to-buy customers."
Compaq, for its part, says that component supplies are not an issue in getting the iPaq into buyers' hands. The company misjudged demand for the product, according to Hahn, who said the iPaq has been shipping to online retailers since the first week of June.
"We would always love to have more components on every level, but there's not any one thing that's a stickler," she said. "We're continuing to ramp up as quickly as we can."