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3/4/2003
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Thumbs Down In 1Q For Handhelds

Shipments of handheld devices fell more than 11% in the first quarter, as the industry continued to take a pummeling from the weak economy

The slow economy continued to pummel the troubled handheld computer industry, as new data reveals an 11.1% drop in worldwide shipments in the first quarter from the previous year.

The biggest loser in market share, according to preliminary statistics from market researcher Gartner, was Palm Inc., which shipped 22.1% fewer units. Nevertheless, Palm hung on to the No. 1 spot with 32.8% of the 2.84 million units shipped--more than twice that of No. 2 Hewlett-Packard's 16%.

"A poor economy hampers people's ability to buy what they want or upgrade as frequently as they would like," Gartner analyst Todd Kort said. "IT spending is also being held in check by the lack of economic growth."

Palm, on the other hand, has failed to upgrade products as aggressively as competitors, which has contributed to its market decline. However, the company's latest products, the Zire 71 and Tungsten C, puts it back on track in terms of product features, and could position the company for more sales in the mid- and upper-market, Kort said. About half of Palm's shipments in the first quarter were from its low-end $99 Zire.

"Palm may have hit bottom and is probably going to start making a comeback," Kort said.

Maybe so, but the company reported a 29% revenue drop in the third quarter to $209 million, compared with $292.7 million a year earlier. The company also reported a net loss of $172.3 million, compared with a net profit of $2.9 million in 2002.

In the Gartner report, third-ranked Sony and fifth-place Toshiba recorded the biggest boosts in market share, increasing 59.6% and 276.1%, respectively. Nevertheless, both were far behind Palm's 932,011 shipments. Sony and Toshiba shipped 377,908 units and 97,693 units, respectively.

Rounding out the Top 5 was No. 4 Dell Computer, which had 4.9% of the market with 139,500 units.

The Gartner figures, which followed by less than a week a gloomier report by IDC, showed no signs of recovery for the weak global market in handheld computers. IDC said first-quarter shipments plunged 21% from the previous year and 27% from the fourth quarter, to 2.45 million units.

In the United States, Gartner found that Palm's market share dropped 25.9% to 745,000 units, or 38.2% of the total of 1.45 million units shipped. No. 2 was Sony with 16.6% of the market, followed by Hewlett-Packard (13.5%), Dell (9.1%), and Research In Motion (4.7%).

For the first time, worldwide revenue from Microsoft's Windows CE PDA surpassed that of the Palm operating system. On an end-user revenue basis, Windows CE accounted for 52% of the market, compared with Palm's 37%.

Nevertheless, in number of shipments, the Palm OS PDA represented 49% of the market, despite a decline of nearly 400,000 units from a year ago. Windows CE's market share was 36%, with 330,000 more shipments than the previous year.

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