Wireless to spark handheld boom

Handhelds are defying the slowdown that has hit PC sales. Look for the trend to continue, say experts

PC makers may be lining up to offer bad news, but PDA manufacturers like Palm and Handpsring, can't seem to ramp up production fast enough. And those in the industry say the growth in PDAs will continue for the foreseeable future, fuelled by the devices' relative cheapness, their increasing functionality and the advent of the wireless Internet.

Chip makers Intel and AMD, as well as PC makers such as Apple and Gateway, have all delivered disappointing earnings news in the past few days. In the mean time, handheld startup Handspring, which makes devices based on Palm Computing's operating system, posted a smaller-than-expected loss amid strong sales. Industry analysts say handhelds are still selling well in the post-Christmas season.

"Handhelds are... cheap enough, they're sexy enough, and they help people get their lives organised," says Ken Dulaney, vice president of mobile computing at research firm Gartner. "They're part of the electronics fashion industry more than the PC industry. People buy them based on emotion, rather than need."

That sexiness is helping handhelds catch on to the mass market in the short term. But the next step in their evolution is the integration of wireless connectivity, which is expected to give handhelds a broad business and consumer appeal on the same scale as mobile phones. "The biggest growth [in handhelds] remains to be seen," says Emmanuel Klotz, operations manager for Hewlett-Packard's Jornada handheld in Europe. "The key will be the mobile Internet, and the implementation of GPRS [general packet radio service] networks."

Wireless is high up on the agendas of most handheld computer makers. Palm will get a GSM clip-on modem from wireless firm UbiNetics later this month, and is working with Sprint PCS on a CDMA [Code Division Multiple Access] wireless modem for the US market. Handspring began selling the VisorPhone clip-on wireless device for its products last year and plans to launch in Europe by mid-year.

The London-based Symbian consortium, which uses Psion's EPOC operating system, has plans to launch several combination mobile phone-organisers, as does Microsoft with its PocketPC operating system.

The wireless Internet is expected to deliver revenues of $230bn (£156bn) by 2006, according to a study released Thursday by research firm Strategy Analytics. "M-commerce will be huge," says Catherine Pennington, analyst for European smart handhelds with IDC.

Applications such as wireless email and electronic wireless purchasing are expected to be popular with consumers, while businesses will find it increasingly useful for their employees to have instant access to up-to-the-minute corporate information, no matter where they are.

Palm believes corporations will increasingly provide PDAs to their workers. "Sixty-five percent of Palm users synchronise at work," says Bill Mackay, Palm country manager for the UK and Ireland. "We describe that as enterprise by the back door. The future driving PDA sales will be enterprise by the front door."

There are a few hurdles in the path of this optimistic wireless picture, however. One is that better infrastructure is needed for mobile data to be really useful. GPRS, for example, will be "always on", eliminating the need to wait while your device dials up a service provider, but it is not expected to be in general use for a year or more. "You need that always-on capability to offer seamless services. It needs to be able to follow you around wherever you are," says analyst Pennington.

Another difficulty is in deciding exactly what sort of wireless handheld device users will want to buy. Mobile phone companies such as Nokia and Ericsson are betting on devices that combine the functionality of a PDA with a mobile phone, but so far the idea hasn't caught on with buyers.

Apparently, the idea of a clunky mobile phone that folds open to reveal a clunky PDA is not what users have in mind, say experts. At the same time, wireless technology is still too complicated and expensive to include as a standard feature in a PDA. "They haven't settled on the right form factor yet," says analyst Dulaney. "In the long term, you're going to want to have a tiny phone, and then pick up your favourite visual device to connect to the Internet."

Bluetooth, also expected to catch on in a year or so, will allow handhelds to link wirelessly to a mobile phone. Another option, which has caught on in the US already, is the two-way pager, a PDA-like device with a QWERTY keyboard and always-on access to wireless email.

Research In Motion is currently running trials of its BlackBerry two-way pager in the UK, with the help of British Telecommunications (quote: BT). The device will be based on GPRS and will allow normal mobile phone usage via a headset.

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