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Handheld sales lose their grip

Research indicates that Palm and Compaq lost some footing, and that the anticipation of Pocket PC 2002 technology also hurt third-quarter demand.

The handheld computer industry saw a 9.5 percent drop in shipments during the third quarter, as economic woes and weak consumer demand took their toll, according to new research.

Shipments fell worldwide, according to a report Monday from researcher Gartner, with market leaders Palm and Compaq Computer losing ground, and only Handspring and Casio making significant gains.

Palm was still the market leader, according to the report, holding 30 percent of the worldwide market and 38 percent of the U.S. market. But those numbers are down from the 32 percent worldwide market and 40 percent of the U.S. market Palm had in the second quarter.

The company has already warned that sales for its current second quarter, which has traditionally been its strongest since it includes the holiday season, would be lower than the same time last year.

Handspring, which has always been a close second, inched up on Palm, with its worldwide market share jumping from 11 percent in the second quarter to 14 percent in the third quarter. The company's U.S. market share went from 17 percent to 22 percent.

Compaq saw the steepest declines, as sales slid from 16 percent of the U.S. market to just 6 percent. Research In Motion, maker of the BlackBerry device, dipped slightly, and Hewlett-Packard's U.S. market share dropped from 8 percent to 6 percent.

While economic troubles were the primary source of the declines, according to Gartner, the report also suggested that last month's release of Microsoft's new Pocket PC technology had a negative influence.

The fact that customers were aware of the October ship date of Pocket PC 2002 technology and chose to wait for its release, "significantly dampened demand for and shipments of Pocket PC products during the third quarter of 2001," said Gartner analyst Todd Kort.

The weaker demand ensued despite the fact that Compaq said its handheld devices would be upgradable to the new technology, and despite expectations that the software would appeal largely to businesses because of its high cost and complex set of new features.

But problems are already cropping up despite Compaq's attempt to get a head start on upgrades. The company confirmed that it has delayed the shipment of the Pocket PC 2002 upgrade for its iPaq handhelds, as it continues testing the product.