Handheld market: Rising or falling?

Shipments of handhelds were either hot or cold. It just depends on who was doing the counting.

Richard Shim Staff Writer, CNET News.com
Richard Shim
writes about gadgets big and small.
Richard Shim
3 min read
Shipments of handhelds in the second quarter were either hot or cold--it depends on whom you talk to and where you categorize Research In Motion's BlackBerry device.

Research firm Gartner announced Thursday that worldwide shipments of personal digital assistants for the second quarter grew at a healthy 12 percent, to 2.75 million units, compared with the same period a year ago. It was the first time in 10 quarters that shipments grew, according to Gartner. Good news for a struggling industry, right? Well, earlier this week, research firm IDC said worldwide shipments for the second quarter dipped 2 percent, to 2.20 million units.

BlackBerry shipments jumped 289 percent, to 510,000 units, in the second quarter, according to Gartner. That number roughly accounts for the gap of 550,000 units between Gartner and IDC estimates.

The difference in the analysts' totals underscores a change in the idea of what a handheld organizer is. Gartner included wireless data devices, such as RIM's BlackBerry and certain Hewlett-Packard iPaq models, in its shipment estimates, while IDC did not. After significant growth in shipments in early years, the handheld market has slowed dramatically. However, there are still innovations driving shipments--they just may be counted in different markets.

These distinctions in category could mislead investors and industry watchers judging whether a sector and its players are healthy. For example, PalmOne has the greatest market share in handhelds, according to both research firms, but its handheld shipments have been slipping over the last couple of quarters. Still, the company has been thriving, to judge from its stock price, which nearly doubled in the last month, thanks largely to its combination cell phone and organizer, the Treo 600.

While shipments of the Treo 600 had been limited by a shortage of a display component, the company recently found new suppliers and corralled leading cellular carrier Verizon Wireless as a supporter. The Treo 600 began selling in Verizon Wireless retail stores this month. The Treo 600 is also being sold by Sprint, T-Mobile, Cingular and AT&T Wireless.

While this would appear to be a success, neither research firm counts the Treo 600 in its handheld reports.

Todd Kort, an analyst at Gartner, said the Treo 600 is more of a voice device, so the firm counted it with cell phones, while BlackBerrys are more data-oriented, so they were included with PDAs. IDC counts the BlackBerry in the converged device category, by which measure it has the second-largest market share, at 12.7 percent, well behind Nokia's 41.7 percent.

The Treo 600 and the Blackberry are the first wave of former "handhelds" evolving into "smart phone" or "converged device" categories.

"Handhelds are changing--they're becoming more powerful, and manufacturers are striving to push them beyond just PIM (personal information management)," IDC analyst David Linsalata said. "But once you add voice or data, you have a different device, subject to different usage and channel conditions."

Wireless devices are generally sold through cellular carriers, while organizers are sold through retail stores, such as Circuit City or Best Buy.

Devices expected from RIM will fall into the cell phone category, continuing to blur the line between organizers and voice devices.

RIM is looking to add BlackBerry capabilities to cell phones, according to Mark Guibert, RIM vice president of corporate marketing, who pointed to the company's recent announcement with Motorola to bring BlackBerry service to Motorola's MPx phones but declined to comment on whether the company was working on a candy-bar-shaped smart phone with BlackBerry service.

Kort said RIM would release such a device around the end of the year.

Kort said growth and innovation in the handheld market is not to be counted out just. Such features as global positioning system are being added to devices and rejuvenating demand. Kort pointed to HP devices with GPS modules, which put in a strong showing in Europe.