The Year Ahead: Will wireless revive the PDA market?

Shipments of handheld computers fell throughout 2001. 2002 looks like another lean year: only wireless technologies will boost sales, say analysts

If 2000 was the year handheld computing exploded into the mainstream, 2001 was all about realising that the boom wouldn't last. Even though many observers say the mobile market will recover, it is not likely to do so until 2003.

Sales figures for handheld computers in the latter half of 2001 speak for themselves: worldwide shipments were down 9.5 percent in the third quarter compared to the second quarter, and down nearly 35 percent on the same period in 2000, according to analyst firm Gartner. Analysts pin the blame on weak consumer demand and the sluggish economy.

"This was not really a good year," said Roberta Cozza, an analyst with Gartner. "It was already clear (that it would be bad) at the beginning of the year." Handheld makers like Palm, which misjudged the situation and ended up with massive unsold inventories, exacerbated the problems of slow sales. "They messed up the channel completely," Cozza added.

For buyers, slower growth and weak consumer demand may mean a more sedate pace for new products, as handheld companies sober up about the possibilities of their market. But so far new technologies, like all-in-one wireless products, are still being pushed ahead.

In 2000, the wireless market grew more than 100 percent than it did in 1999, making the figures for 2001 seem all the more disappointing. Gartner doesn't see that kind of growth returning until 2003.

The handheld market shouldn't be written off, however; in fact, analysts believe there is a large demand for mobile devices in both the business and consumer markets. It is just a question of making the gadgets useful enough.

Wireless technology was supposed to do this, but so far it hasn't done the trick. "There was a little bit of a disappointment with the wireless technology," Cozza said. "We're not really seeing any (wireless) applications that can drive demand for mainstream corporations." But, he says, when this does happen, then companies will start buying PDAs in large amounts.

In fact, wireless is on most people's minds when it comes to the future of mobile computing. Wireless technology in various forms promises constant connectivity to corporate data, and that is the sort of thing that enterprises are willing to pay for, say analysts. "Wireless is the key, really," said analyst Tim Mui of IDC. "Messaging, data syncing, file distribution, all that is really important for enterprises. It is also appealing for the consumer market."

Andy Brown, IDC's research manager for mobile computing, adds price to the list. "Corporations will see the benefits of handhelds when they get remote data access," he said. "PDAs need to move beyond the PIM (personal information manager), and drive costs down."

After a sluggish start, handheld companies like Palm, Handspring, HP and Compaq are becoming more aggressive about developing all-in-one wireless devices. Handspring is the first mainstream handheld company to introduce an integrated wireless PDA, the Treo, which will be available in January in the US.

Among mobile phone handset makers, Trium, Sagem and Ericsson have started selling wireless PDAs. But Nokia's 9210 Communicator has recorded the strongest sales, after the company revamped its software and added a colour screen. But while the Communicator has become the biggest-selling PDA maker in Europe, Nokia's PDA sales still amount to just a tiny fraction of its mobile phone sales.

Another early success in this area is the BlackBerry, from Research in Motion, which launched in the US and has now seen a limited launch in the UK courtesy of mmO2 --- the recently spun-off mobile arm of BT.

MmO2's BlackBerry is one of the first devices to rely on GPRS (general packet radio service) for an always-on data connection, and those in the industry expect many more devices to use GPRS once it is stable and widespread enough.

IDC's Smith said that despite the availability of handsets and the BlackBerry device running on GPRS, it is far from clear how well the network actually functions. "It will be interesting to see whether the infrastructure can cope (with the new devices)," Smith said. "It's probably the kind of thing where they've added the traffic as an afterthought. They're probably relying on there being a limited number of users initially."

Wireless is also coming to the PDA world in the form of Bluetooth, a radio technology for connecting PDAs, mobile phones, laptops, PCs and other gadgets. After a couple of years of unsubstantiated hype, Bluetooth-enabled devices are now arriving on the market, and what's more, they even seem to work.

But it will be perhaps another year or more before the technology is cheap enough that hardware manufacturers will consider building it into their gadgets as a standard option, say experts.

Analysts see Bluetooth complementing other wireless technologies such as wireless LANs, to make data more mobile. "I think it has a place," said IDC's Mui. "These wireless standards will all work together for different applications: Bluetooth for data synching and short-range data transfer, wireless LAN for heavy file transfer, and WAN (wide-area network) for when you're on the move and need certain core pieces of data, like emails."

While the technology evolves and matures, the form of what we now think of as a PDA will also change. 2001 saw the introduction of the Wrist PDA from Fossil, as well as a Comdex where Bill Gates put his chips on the Tablet PC.

No one form factor is likely to win out, believes analyst Mui. "People will probably have lots of different devices," he said. "One will be more voice-focused, one more data-focused. There are no set boundaries."

See ZDNet UK's Christmas & New Year Special for our look at the tech world in 2001, and what's coming up in 2002, plus a shopping guide with reviewers' best buys.

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