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Hand-wringing over Handheld PCs

Squeezed by the boom in palm-sized handhelds and the increasing interest in notebook-like devices, the original Handheld PCs appear to be fading.

Squeezed by the booming popularity of the palm-sized handhelds and the increasing interest in notebook-like Jupiter devices, the original Handheld PCs may be resigned to a fate worse than death in the PC world: the niche product.

The original Handheld PCs--the ?clair-shaped clamshell devices which were the precursor to the H/PC Pro--are seemingly being relegated to the fringes of the handheld world.

These devices, like the newly released Hewlett-Packard Jornada 680, are increasingly a victim of their cramped keyboards, small displays, and high price tags, analysts say.

In addition, Microsoft and its partners are showing little interest in reversing the trend. Instead, Microsoft is putting the full weight of its marketing might behind some of its Windows CE devices.

The company recently launched an advertising campaign supporting the Jupiter products, which are just a little smaller than a notebook PC and feature an almost full-sized keyboard and display. Microsoft is expected to do the same for the new color palm-size PCs, which are the company's best hope yet of putting a dent in Palm Computing's incredibly popular PalmPilot.

"When the Jupiter devices were released, a lot of people questioned whether the standard [Handheld PC] would have any future life," said Jill Hause, a handheld analyst at International Data Corporation. "The whole reason people didn't like the clamshells in the first place was small screens and keyboards."

Handheld PC shipments totaled about 415,000 last year, compared to 20,000 Jupiter devices, although the Jupiters were only released in the last month of the fourth quarter, Hause said. IDC projects that Jupiter shipments will soar to 1 million in 2002, while Handheld PC shipments will actually dip, to 384,000.

"We see this as a niche segment of the market," Hause said. "People who buy this are sacrificing everything to portability."

Microsoft has essentially conceded this assessment but says the devices will never totally fade away. The appeal of these products in specific fields, such as data collection, remains.

"It's a niche, but it's a healthy niche that's profitable," said Gerry Purdy, editor of industry newsletter Mobile Insights, who predicted the market for Handheld PCs will grow at 10 percent per year, compared to near-100 percent growth for the palm-sized handhelds and the Jupiter devices.

Although most manufacturers upgraded the Handheld PC's operating system when the H/PC Pro platform was released, the smaller products do not really benefit from many of the new features of the revised operating system, which was designed to enable the new displays and keyboard of the Jupiter device.

Handheld PC devices are adequate for limited text-heavy email and word processing, Hause said, and may be ideal for some applications where portability is king. But most individual consumers interested in a Windows CE device for email or word processing will likely upgrade to a full H/PC Pro, or Jupiter, especially because the price difference is generally around $100.

For example, the older HP Jornada 660 clamshell device is priced at $791, while the larger and more feature-packed Journada 820 is priced at $886.

"As long as the price differential isn't high, people will want bigger screens and keyboards," Hause said. "There is a lack of a price delta, which there needs to be. In consumers' minds, smaller equals less money."

And as Microsoft continues to pile on extras to the already feature-laden color palm-size PCs, there becomes less of a motivation to spend an extra $300 for the Handheld PC merely for portability. "It's kind of a stretch," she said.

HP's plan
Though some Handheld PC makers are expected to drop out of the market altogether, some companies, like HP, will continue to offer the devices if only to present a broad product line to enterprise customers. HP is unique in that it offers the full breadth of Windows CE devices, a strategy that may resonate with corporations looking to match devices to specific workers.

"HP is saying: 'We want to walk into an enterprise and we want to have whatever machine they need,'" Hause said, noting that this strategy works for HP because they were already offering the Handhled PC products. Companies new to the market, like Compaq Computer, should probably just focus on the palm-size and Jupiter markets.

Compaq recently released its color palm-size PC and is expected to offer a Jupiter device later this year. "HP is in a very unique position. Given the limited resources and limited sales in PC companions thus far, it's probably not terribly wise to come out with three models," Hause said.