The promise of the converged wireless device is a reality, although exactly what it will look like is still being debated.
Those in the industry have long preached the inevitable marriage of computers and mobile phones, and the current selection of high-end devices seems to provide ample evidence of the trend. Research In Motion (RIM) offers its BlackBerry wireless e-mail/mobile-phone device throughout much of the world. Handspring sells its similar Treo personal digital assistant (PDA)/mobile phone using the Palm operating system. And there is a range of wireless devices operating on Microsoft’s PDA software.
“Clearly, what’s hot right now is wireless technology,” said Alex Slawsby, a research analyst for the smart handheld device group at consulting firm IDC. “The market for standalone handhelds is stagnant, but the market for telephony-enabled devices is increasing rapidly.”
Indeed, according to IDC’s most recent numbers, worldwide shipments of PDAs slipped from 12.5 million units shipped in 2001 to only 11.3 million last year. IDC predicts 15 million PDAs will ship in 2006-meaning the PDA industry has largely crested.
“That’s what we’re kind of betting the company on,” said Joe Sipher, vice president of marketing for Treo maker Handspring.
Sipher said Handspring was founded in the late 1990s with the intention of focusing on wireless technology. He said second-generation wireless networks at the time were not yet able to handle the company’s data requirements, which forced Handspring to make non-wireless PDAs. That all changed with the release of Handspring’s Treo, which marks the company’s new focus on wireless.
“All of our future research-and-development efforts are on smart phones,” Sipher said. “We absolutely see this as where the market is going.”
Other handheld PDA makers have not been so nimble. PDA giant Palm only recently began selling its first PDA/mobile-phone device, while companies like Hewlett-Packard (HP) are offering only add-on wireless modems for voice functions.
However, adding wireless capabilities to PDA-style devices is only part of the story. There is a separate, growing class of devices those in the industry have dubbed smart phones-devices that operate much like a wireless PDA but attack the problem from a different direction.
Microsoft’s approach to the wireless market highlights the differences between PDA-style devices and smart phone-style devices. Microsoft has long been selling its Pocket PC operating system, which is specifically designed for PDA-style devices. Microsoft added wireless support to the platform early last year. But more recently, Microsoft released its new Smartphone operating system (OS), a platform for devices that are shaped like mobile phones but can do far more than simply place voice calls.
“We’re seeing smart phones as an overall percentage of the market grow,” said Michael King, a senior research analyst with Gartner Dataquest.
According to Gartner’s research, sales of smart phones will greatly eclipse those of wireless PDAs by 2006. The firm forecasts 48 million smart phones will be sold that year, compared with 4 million clamshell-style wireless PDAs and 9 million tablet-style wireless PDAs.
Other research firms agree. In a new report from Allied Business Intelligence, the firm predicts handset replacement sales will grow from 211 million last year to 591 million in 2008. Further, European analyst firm Canalys said shipments of smart phones should exceed those of handhelds in the Europe, Middle East and Africa region for the first time this year. The firm said smart-phone sales would total around 3.3 million units this year compared with around 2.8 million wireless PDAs.
Although subtle, Canalys offers examples pointing to the difference between smart phones and wireless PDAs. The firm said the Orange SPV, based on the Microsoft Smartphone software, and the Sony Ericsson P800, based on the Symbian OS, are examples of smart phones, mainly because they are primarily mobile phones. On the other hand, devices like the Palm Tungsten T or the MmO2 XDA are primarily PDAs, with voice functions thrown in.
The expectations for smart-phone sales are based on a number of factors-and are especially notable because some industry watchers once believed smart phones would attract only a niche market of users. Perhaps the most striking selling point for smart phones is the price. IDC’s Slawsby said just during the past year prices have fallen from US$500 to US$200 per device in some cases.
“That is a rapid jump, and it quickly opens up the mass-market opportunity,” he said.
Further, rapid innovation in the mobile-phone industry has given birth to a range of new device functions, features and services.
“It’s not that people are buying more smart phones; it’s that a lot more phones are smart,” said Gartner Dataquest’s King. “The opportunity for smart phones is growing because there’s more to do with them.”
One more major push for smart phones comes from wireless carriers, which are eager to increase sales of wireless data applications. Smart-phone users are far more likely to pay for data services than the average mobile-phone owner. Indeed, according to advisory firm Analysys, wireless data accounted for 12 percent of Western European operators’ revenues last year, but the numbers will increase to 24 percent in 2005 and 36 percent in 2008-increases that follow smart-phone sales projections.
“There was a time when multimedia personal computers were going to be a niche,” said Handspring’s Sipher.
And even that may not be the end of the story. According to the Shosteck Group, the number of camera phones will exceed the number of standalone digital cameras sold worldwide by as early as this year. Further, the group said multimedia phones will outsell personal computers and laptops by the end of next year.
“People are seeing that you can actually have a converged device,” Sipher said. GW
