Cahners: PDA sales still growing, but more slowly

Hype may be building over wireless services, but a report from Cahners In-Stat Group Wednesday said sales of PDAs (personal digital assistants), popular devices needed to take advantage of those services, are slowing.

Total shipments of PDAs grew 17 percent in 2001, with 8 million units shipped during the year, according to the report. However, this positive growth is actually much less than the growth rate of 36 percent experienced in 2000, when 6.8 million units were shipped, said Neil Strother, senior analyst at Cahners In-Stat/MDR.

The slower growth rate can be blamed on several factors, including the stagnant global economy and troubles at market leader Palm Inc., which endured mounting inventories and the resignation of Chief Executive Officer Carl Yankowski, Strother said. Also, higher-end models are still too expensive for consumers and businesses to justify spending on the devices in the current economic climate, he said.

The report forecast an 18 percent growth rate for 2002, citing the entrance of new companies into the market, and the development of devices with more functionality and reliability. Consumers still drive sales of PDAs, and when they feel more secure financially, they will look to start purchasing the devices again, Strother said.

"Business customers probably won't implement laptop-like deployment (of PDAs) for another couple of years, but more and more enterprises are starting to show interest in them. Companies that can afford it, and can see a healthy ROI (return on investment) will deploy," he said.

The market for PDAs should continue to experience double-digit growth over the next few years, peaking at 30 percent in 2004, the report said.

In a development that might increase sales of new PDAs, Palm's dominant operating system was updated at the Palmsource conference in San Francisco Tuesday. Palm unveiled Palm OS 5, which features increased security, better support for 802.11b wireless LANs, and improved screen resolution. Palm OS 5 will also run on ARM Ltd.-designed chips, which have more than double the power of existing processors, said David Nagel, president of PalmSource Inc., the newly created spin-off of Palm, which will focus just on operating systems.

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