Palm has the PDA world in its hands

New PDA sales figures show that Palm's m100 has claimed some of Handspring's share of the market for low-priced devices. Compaq's iPac was an early hit, too

The August introduction of Palm's m100 has helped the market leader widen its margin over rival Handspring in sales of value-priced PDAs.

August PDA market share numbers, compiled by research firm NPD Intelect, showed Palm sales increased nearly ten percent over July with 70.3 percent of the market. Handspring, a Palm OS licensee, was down slightly more than ten percent with 15.5 percent of the market.

Handspring's loss of market share was due to Palm's introduction of the $149 (£101) m100 and, to a lesser degree, Compaq Computer's iPaq Pocket PC-based device, said Sima Vasa, vice president of technology products at NPD Intelect. August was the first month since Handspring's launch of its low-cost Visor that the company had lost market share.

A surge in market share generally follows the release of a new product, but the real test will be in a couple months when the marketing hype wears off, Vasa said.

The m100 was Palm's inexpensive addition to its product line, which includes the market's most popular unit, the sleek Palm V. Previously, Handspring's Visor offered consumers an affordable alternative to Palm products, most of which started at roughly $250, the top price for Visor units.

In addition to price, Visor products won acclaim for their expansion capabilities, made possible by Handspring's Springboard expansion slot. When the Visor launched in April, the company said about 20 expansion modules would be available by the end of 2000. But so far, only a handful are shipping.

Earlier this month, Handspring announced plans to release a cell phone module, called VisorPhone, in November. The module is expected to cost $299, integrate with a PDA user's contact list and work on Global System for Mobile Communications (GSM) networks, which have a large presence in Europe.

Another Springboard module creating buzz in the market is Good Technology's SoundsGood MP3 player, which is currently shipping for $269.

Palm has also made efforts toward expansion and wireless communications. The company announced Friday it would team with RealVision to release a cell phone sled for the Palm V and Vx devices, which be released in early 2001, although only in Europe.

On Monday, Palm announced it would work with Motorola to manufacture a smart phone with a color screen, scheduled for release in 2002.

Palm is continuing to promote its OS by licensing it to other manufacturers, with an eye toward expanding the market for personal digital assistants. In addition to Handspring, Palm has licensed its OS to Sony, which introduced its Clie units in late August.

Analysts have said the Sony brand name will help Clie to attract new PDA consumers to the market.

"Palm's strategy to have both hardware and software is working, but they may have to focus soon. They haven't had to because they have the capital to invest in both," Vasa said. "It's a double-edged sword though -- they lose some share, but the solace is that they are reaping some of the benefit."

Handspring does not plan to stand still, however. The company is scheduled to release two new PDAs in October, although neither of them will compete with the ultra-slim Palm V.

Manufacturers that support the market for Microsoft's Pocket PC platform are starting to make some headway with the PDA crowd. The much-hyped Compaq iPaq Pocket PC, released in July, leaped into the top five for August, claiming a 6.6 percent market share.

Vasa said that the Compaq share is encouraging for Pocket PC manufacturers, but the jury is still out on whether it can appeal to cost-conscious buyers who account for most of the market.

The verdict may come soon, though. NPD Intelect predicts that the second half of 2000 will be a boom time for PDAs and predicts twice as many units will ship this year as last.

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