PC makers may be lining up to offer bad news, but handheld manufacturers like Palm and Handspring can't seem to boost production fast enough. And those in the industry say the growth in sales of PDAs (personal digital assistants) will continue for the foreseeable future, fueled by the devices' relative cheapness, their increasing functionality, and the advent of the wireless Internet.
In the meantime, handheld start-up Handspring, which makes devices based on Palm's operating system, posted a smaller-than-expected loss amid strong sales. Industry analysts say handhelds are still selling well in the post-Christmas season.
"Handhelds are...cheap enough, they're sexy enough, and they help people get their lives organized," said Ken Dulaney, vice president of mobile computing at research firm Gartner. "They're part of the electronics fashion industry more than the PC industry. People buy them based on emotion rather than need."
That sexiness is helping handhelds catch on to the mass market in the short term. But the next step in their evolution is the integration of wireless connectivity, which is expected to give handhelds a broad business and consumer appeal on the same scale as mobile phones.
"The biggest growth (in handhelds) remains to be seen," said Emmanuel Klotz, operations manager for Hewlett-Packard's Jornada PDA in Europe. "The key will be the mobile Internet and the implementation of GPRS (general packet radio service) networks."
Wireless is high on the agendas of most handheld computer makers. Palm will get a GSM clip-on modem from wireless firm UbiNetics later this month and is working with Sprint PCS on a CDMA (Code Division Multiple Access) wireless modem for the U.S. market. Handspring began selling the VisorPhone clip-on wireless device for its products last year.
The London-based Symbian consortium, which uses Psion's EPOC operating system, has plans to launch several combination mobile phone-PDAs, as does Microsoft with its Pocket PC operating system.
Applications such as wireless e-mail and electronic wireless purchasing are expected to be popular with consumers, while businesses will find it increasingly useful for their employees to have instant access to up-to-the-minute corporate information, no matter where they are.
Palm believes corporations will increasingly provide PDAs to their workers. "Sixty-five percent of Palm users synchronize at work," said Bill Mackay, Palm country manager for the United Kingdom and Ireland. "We describe that as enterprise by the back door. The future driving PDA sales will be enterprise by the front door."
There are a few hurdles in the path of this optimistic wireless picture, however. One is that better infrastructure is needed for mobile data to be really useful. GPRS, for example, will be "always on," eliminating the need to wait while your device dials up a service provider, but it is not expected to be in general use for a year or more.
"You need that always-on capability to offer seamless services. It needs to be able to follow you around wherever you are," said Catherine Pennington, analyst for European smart handhelds with IDC.
Another difficulty is in deciding exactly what sort of wireless handheld device people will want to buy. Mobile phone companies such as Nokia and Ericsson are betting on devices that combine the functionality of a PDA with a mobile phone, but so far the idea hasn't caught on with buyers.
Apparently, the idea of a clunky mobile phone that folds open to reveal a clunky PDA is not what people have in mind, experts say. At the same time, wireless technology is still too complicated and expensive to include as a standard feature in a PDA.
"They haven't settled on the right form factor yet," said Gartner's Dulaney. "In the long term, you're going to want to have a tiny phone and then pick up your favorite visual device to connect to the Internet."
Bluetooth, also expected to catch on in a year or so, will allow handhelds to link wirelessly to a mobile phone. Another increasingly popular option is a two-way pager such as Research In Motion's BlackBerry, a PDA-like device with a keyboard and always-on access to wireless e-mail.