The State of the Handheld World
By David Haskin
Managing Editor, allNetDevices
December 18, 2000
Palm got bigger, Handspring came on like gangbusters, Microsoft still couldn't find traction and Psion remained an intriguing wildcard.
That is the fast summary of the past year in the handheld industry. Looking ahead, however, the winds of change are starting to blow as wireless capabilities are being built into handhelds and form factors are changing. Here's a look at the past year in the handheld sector and what to look for in the coming year. Vendors are listed in order of market share.
Palm
A year ago, a Palm executive told me the company was willing to risk competing with itself by licensing its handheld platform to vendors such as Sony and Handspring. Besides the royalty stream, more vendors using the Palm platform would spur interest in handhelds in general, and the competition would keep Palm's handheld designers hungry, I was told.
That strategy worked perfectly in 2000. Yes, Palm took a hit from Handspring, which now has about 15 percent market share, most of which was taken out of the hide of the Palm III series. However, Palm still has a 70 percent market share, which is hardly shabby, and its revenues are soaring because of overall unit sales growth in the handheld sector.
Palm is also about to realize significant licensing fees. Besides Sony and Handspring, a variety of phone vendors such as Kyocera and Samsung are creating Palm-based smart phones that combine handheld and wireless phone functionality. The licensing is going so well that CEO Carl Yankowski said recently that the company is considering spinning off a new company to develop and sell the platform.
Next year, look for Handspring to release new devices that go after the Palm V series. The only potential dark cloud on Palm's horizon, and it's far in the distance, is that its 16-bit platform is getting creaky, even with all the new wireless capabilities being built in.
As bandwidths increase, the day is coming in which multimedia will become an important handheld application and the current Palm platform isn't up to the task. But that day is at least a couple of years away and Palm has plenty of time to adjust. In the meantime, it looks like reasonably clear sailing in 2001 for Palm.
Handspring
The new kid on the block used an aggressive ain't-it-cute marketing campaign to rapidly build market share and a loyal customer base. It also kicked butt in the retail channel. However, Handspring faces serious questions in 2001.
Specifically, what does it do next? Handspring has no significant intellectual property beyond its innovative Springboard expansion technology. It's been trying to license Springboard, but has had only limited success, so it is unlikely that its intellectual property will open a new spigot of revenue in the coming year.
Another issue is how Handspring will differentiate itself now that Palm is competing on price with the m100. One way would be to offer products based on other operating systems, and rumors have been floating around about Handspring using Linux and even Windows CE. Such a change would beef up Visor's multimedia capabilities and, in the case of Linux, enable the company to keep prices low and to build on its cult following.
That's merely speculation, however, which Handspring steadfastly refuses to discuss. What does seem to be true is that Handspring needs to do something in the next year beyond simply trying to take sales away from Palm's high-margin Palm V series. The next year will determine whether Handspring is capable of even bigger and better things than it already has accomplished.
Microsoft
These guys can't catch a break in the Net device space. First there was the boondoggle of the first two generations of Windows CE, an ugly operating system for small devices that was spurned both by consumers and developers.
Then, last spring, Microsoft released the newest version of Windows CE for handhelds, redubbed Pocket PC. These handhelds are more sophisticated than Palm devices, with beautiful full-color displays, lots of RAM (much of which is needed to handle the OS) and plenty of processing power.
However, while Microsoft gained a few market share points, Pocket PCs didn't catch fire in 2000. The problem: The beautiful displays and all that RAM make the devices too expensive for mass appeal.
Microsoft seems resigned to playing a broad role in the Net device world, but not a deep one. Its Stinger hybrid smart phone/handheld platform should notch a few wins despite formidable competition from Symbian's EPOC and Palm. Microsoft also is slugging it out in the interactive TV arena, earning a bit of success against tough competition such as Liberate Technologies and OpenTV.
The bottom line: Microsoft is a player in more Net device arenas than any other vendor. However, it is unlikely to be a dominant player in any arena. Given their virtues, Pocket PCs should gain a few more market share points from Palm in the coming year, but they still won't catch fire unless component costs and end user pricing come down signficantly.
Psion
Psion has a lot going for it. It uses the EPOC platform, which it developed and which is now developed and managed by the Symbian consortium. EPOC is arguably the most elegant platform for basic handheld functionality.
Psion handhelds are undeniably popular in Europe, with a loyal user base. And it is the most likely of any handheld hardware vendors to release a significantly new type of device in the next year: A hybrid phone/handheld communicator.
But its handhelds will continue to be a distant fourth in North America unless one of two things happens. First, the company's new communicator must be released in North America and the device must become a hit.
Second, its relationship with SONICblue (formerly S3), which recently re-branded Psion's Revo as the Mako for sale in the U.S., must flourish. The two companies reportedly are working on similar branding arrangements for forthcoming devices and if SONICblue has its marketing act together, perhaps it can make some headway on behalf of Psion.
If one of those things occurs, Psion will gain popularity in North America. If both occur, it could become a force here and a juggernaut in Europe. What remains to be seen is whether Psion can marshall enough resources and aggressiveness to succeed in the U.S.
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