Smart phone waves goodbye to PDA

1 Feb 2006

Relentless growth of converged devices such as Symbian S60 smart phones is contrasting sharply with plummeting sales of traditional handheld mobile devices, for example PDAs, research from IDC reveals.

According to IDC, the Western European mobile device market – including stand-alone handhelds and converged devices – grew 26pc year on year in the final quarter of 2005.

Total shipments reached 4.5 million in the fourth quarter as the relentless growth of Symbian S60 throughout 2005 was maintained to drive total mobile device shipments of 13.9 million units for the year, compared with 8.9m in 2004, representing year-on-year growth of 56pc.

However, while record S60 shipments contributed significantly towards market performance in the fourth quarter of 2005, final quarter growth represented the most disappointing year-on-year volume increases of all quarters in 2005 for both converged and handheld device categories.

“With intense competition from rival consumer electronics over the festive period contributing to an abrupt halt in the growth witnessed by the handheld category in 2005, growth was highly reliant on a converged device segment in the fourth quarter of 2005 that itself witnessed disappointing growth outside the consumer-centric Symbian S60 platform,” said Jean-Philippe Bouchard, senior research analyst, IDC European Mobile Devices.

Most significantly, despite growing 31pc sequentially the standalone handheld segment suffered negative year-on-year growth of -17pc as shipments reached just 839,000 units compared to volumes in excess of a million in the corresponding quarter of 2004.

“Disappointing growth for handhelds in the high-volume final quarter has reinforced the belief that global positioning system [GPS] bundling in isolation could not maintain positive growth indefinitely despite portfolio refreshes and aggressive price cuts by leading vendors such as Hewlett-Packard [HP] and Palm,” said Geoff Blaber, research analyst, IDC European Mobile Devices.

“The multi-application superiority of converged devices and heavily subsidized price points, combined with aggressively-priced dedicated GPS systems, triggered the decline in the fourth quarter of 2005, presenting a bleak outlook for the market in 2006.”

With the exception of Acer and Medion, all top five handheld vendors suffered negative growth in the fourth quarter of 2005. However, substantial price cuts by HP and Palm to counter the competitive threat from Acer and other low-cost Windows Mobile vendors fuelled rejuvenation in market share from previous quarters. Palm led the market for the first time since the first quarter of 2004, with 23pc, and was followed by HP, proving that despite a dominant European preference for Microsoft’s OS, demand remains for Palm OS devices positioned in specific segments at competitive price points.

In contrast to handhelds, converged devices exhibited market growth of 42pc, driving shipments of 3.6 million units to push total shipments for 2005 to just under 11 million units, representing year-on-year growth of 80pc.

However, growth fell below expectations in the final quarter as major vendors such as Motorola and Sony Ericsson saw a substantial slowdown in shipments as devices such as the MPx220, A1000, and P910i reached the end of their life cycles and the channel was cleared for new launches in the opening quarter of 2006. As a consequence, the market continued to be dominated by Nokia S60 shipments as the launch of the N70 further invigorated demand, assisted by extensive 3G service/content promotion by operators in anticipation of the Christmas period.

The Finnish vendor consolidated a 76pc market share, followed by RIM, which maintained momentum to ship 215,000 units. The prolonged absence of push email capability for Windows Mobile 5.0 combined with the launch of RIM’s EDGE-capable 8700 device presents a positive outlook for the Canadian vendor in 2006.

“The release of Windows Mobile 5.0 and the influx of new devices that is fueling promises to invigorate the market in 2006, particularly within the enterprise space,” said Andrew Brown, program manager, European Mobile Devices and Computing.

“However, Symbian’s positioning as an OS and flexibility to enable low-cost implementation in multimedia or enterprise-centric devices means Microsoft faces a significant challenge to rival the dominance that Symbian has established to date.”

By John Kennedy