Handheld vendors are gearing up to meet increasing consumer demand for converged devices, or smart phones, according to market research firm, IDC.
The market for standalone personal digital assistants (PDAs) had dropped steadily for several quarters, as consumers and businesses held off on purchasing anything other than essential technology items, IDC said.
In 2003, worldwide handheld shipments would decline 8.4 per cent to 11.35 million units.
However, shipments of converged devices, which combined voice and data communications, would increase to about 13 million units by the end of 2003, IDC said.
Converged devices were either cell phones with data capabilities, or datacentric PDAs with voice as an application, IDC analyst, Alex Slawsby, said.
"Building unconnected devices has a short life span over the next couple of years," Slawsby said. "End-users are not interested in carrying multiple devices, they want to carry one device that suits their needs."
Consumers generally favour converged devices where voice is the primary application, and strong support for data applications such as instant messaging and contact databases allow them to ditch their older PDAs, Slawsby said.
Enterprise customers generally want their users to have access to corporate applications and databases, and select larger devices with more processing power and larger screens that add voice capabilities, he said.
The converged device market right now was too small and too young to divide into separate categories, Slawsby said.
Device manufacturers continue to release handhelds that defy easy categorisation into voicecentric or datacentric converged devices, he said.
Nokia dominates the market for converged devices, shipping 1.2 million units and representing 61 per cent of the market in the second quarter, as measured by IDC.
The company would add more converged devices based on the Symbian operating system to its arsenal by the end of the year, and planned to sell millions of its forthcoming N-Gage device by the end of the year, Slawsby said.
The N-Gage would combine voice, data, and gaming applications into a single device expected to cost less than $US539, Nokia said.
A total of about four million converged devices were shipped worldwide in the first half of the year, setting the stage for a strong second half, Slawsby said.
Sony Ericsson and Motorola were also leaders in the worldwide market.
PDA market leader, Palm, plans to get into the converged device market through the purchase of Handspring, which is expected to be completed later this year. Handspring fell off of IDC's list of top five converged device manufacturers in the second quarter, but that is expected to change when the Treo 600 is released later this year.
However, hardware manufacturers would face a point in the future where revenue from hardware declined so that the business was no longer profitable, Slawsby said.
For large companies like HP, Toshiba, or Dell, this wasn't as pressing a problem, since handhelds were only a portion of their overall business, he said.
But for companies like Palm, alternate sources of revenue would be needed to keep their businesses going, Slawsby said.
Those companies would want to consider licensing their technology or developing services around the hardware in order to supplement declining hardware revenues.
"It's part of the long march toward commoditisation," Slawsby said. "It will be a long time before that impact is felt, but these devices manufacturers need to consider alternatives."