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Handheld market gets holiday lift

The gift-giving season boosted sales of handhelds in the fourth quarter, but the overall downward trend in 2003 and ever-stiffer competition mean further gains look difficult, an IDC report says.

Holiday sales brought handheld manufacturers the gift of higher unit shipments in the fourth quarter, but the increase couldn't overcome a downward trend for the year, according to a new IDC report.

The worldwide market for handheld devices totaled 3.4 million units in the fourth quarter of 2003, an increase of 3.2 percent year-over-year and a whopping 52.7 percent sequential jump from the third quarter, IDC said in the report it released Tuesday.

With the news, handheld makers will be able to celebrate two consecutive quarters of increases in global shipments, following declines in the first and second quarters of 2003. But, as IDC predicted, the year saw an overall drop of 17.9 percent in shipments, which slipped from 12.6 million in 2002 to 10.4 million.

Handhelds such as Hewlett-Packard's wireless-equipped iPaq 4150, Dell's Axim X3 and PalmOne's Zire 71, which comes with a built-in camera, made the difference in the quarter, the report said, as they offered customers more features for their money.

But even the newest models will be under more pressure to perform in coming months, according to IDC. While handheld makers will be able to increase shipments, the competition their products face from other kinds of mobile device will be stiff, the research firm said.

"With a growing number of...products that combine both personal information management (PIM) capability and telephony, consumers are moving away from devices that offer only PIM capability," David Linsalata, an analyst at IDC, said in a statement Tuesday.

Earlier this year, IDC predicted that so-called "converged" cellular phones, which come with personal organizer capabilities, will win customers away from traditional handhelds.

"Going forward, handheld device vendors must continue to differentiate and expand into hot product categories, such as media players and digital cameras, to renew growth in their market," Linsalata said.

Companies such as PalmOne that offer diverse product lines are unlikely to be hit as hard as companies with a narrower focus, according to IDC.

During 2003, PalmOne maintained its market share lead, shipping about 4 million units worldwide. HP was next, with about 2.3 million iPaqs shipped, and Sony moved about 1.4 million Clies. Dell, which ranked fourth, sold about 611,000 Axims. Toshiba delivered just less than 307,000 handhelds to round out the top five for the year.

During the fourth quarter, the manufacturers found themselves in similar positions, with only one change: PalmOne led, shipping about 1.3 million units worldwide. HP was next, with about 861,000 units delivered, followed by Sony, with about 478,000 units. Dell ranked fourth, with about 164,000 Axims. And German PC maker Medion finished in the fifth spot, with 97,000 units, according to IDC.