PDA Sales Drop; Microsoft Gains In Operating-System Share

Although global sales of PDAs dropped in the first quarter, the battle for handheld operating system market share perked up, a research firm said Friday.

According to Gartner, worldwide shipments of PDAs dropped nearly 5% in the first three months of 2004 over the same quarter last year. But the fall in sales was overshadowed by Microsoft dramatically closing the gap between it and PalmSource for the lead in PDA operating system share, said Todd Kort, a principal analyst with Gartner.

Palm OS shipments plummeted nearly 21% year-over-year in the first quarter, said Kort. Microsoft made up a bit of ground by increasing its market share 4.6%. That puts PalmSource with 40.7% of the market, and Microsoft, with 40.2%, in a dead heat.

"The decline in Palm OS market share in the first quarter is not unexpected because many Palm OS users have delayed PDA purchases until they can evaluate PalmSource's upcoming operating system, Cobalt," Kort said in a statement. "Palm OS has also been impacted by Microsoft's bundling of Outlook with every Pocket PC, and the preferred status that Microsoft Windows enjoys with enterprise application developers."

Microsoft has been steadily chipping at Palm's lead, added Kort, ever since it entered the handheld operating-system market. In 2000, for instance, Microsoft had just 11% of the market.

The drop in shipments of handhelds with the Palm OS was also accompanied by a fall in sales of PDAs by PalmOne, the primary seller of Palm devices. PalmOne showed a 10.6% drop in first-quarter sales, compared with the same quarter last year. Research In Motion Ltd., which makes the BlackBerry, was the fastest-growing vendor, improving 352% from the first quarter of 2003. RIM's handhelds now account for nearly 15% of all PDA sales, said Kort, a trend that will only accelerate in the second half of this year.

"RIM has begun licensing its technology to Nokia, Siemens, and Motorola for use in mobile phones, as well as to several PDA vendors," Kort said. "This will undoubtedly provide a significant boost to sales of a wide variety of wireless handheld devices beginning in the second half of 2004."