Microsoft's Newest Pocket PCs Making More Headway Against Palm:
I still don't know why everyone blew my thoughts off. Why everyone on si ignored my C/E concepts as pure foolishness. I thinks its because people that haven't used both on a regular basis didn't understand. 18% now.
11/28/00 10:32:00 AM
Source: Bloomberg News
URL: cnetinvestor.com
Redmond, Washington, Nov. 28 (Bloomberg) -- Microsoft Corp.'s software runs about a fourth as many handheld electronic organizers as a competing system from market leader Palm Inc. So why do some analysts think Palm should be worried about the competition?
Since the April introduction of Microsoft's third version of software for palmtop organizers, after the first two failed to challenge Palm, the company's share of the market has risen to 18 percent from 10 percent, according to research firm IDC. Analysts said the gap will narrow as users seek to do more on the devices.
Microsoft's Windows operating system powers about 90 percent of all personal computers and is gaining ground in running corporate networks. Now, the No. 1 software maker is targeting the mobile-computing market. With demand surging for Microsoft-based ''Pocket PCs'' made by Compaq Computer Corp. and others, Palm must update its software or face losing corporate clients, analysts say.
''I'm looking for Microsoft to gain market share here,'' said Kevin Burden, an IDC analyst. ''Any company that's looking at bringing these in in bulk has to be looking down the road, and they don't want to lock themselves into the Palm operating system.''
Three times as many of the new Pocket PCs -- made with Compaq, Hewlett-Packard Co. and Casio Computer Co. hardware -- have been sold this year compared with sales of the earlier versions last year, Burden said. That pickup came after Microsoft and the hardware makers made changes in the new devices to address complaints about the size, battery power and software of older products.
Still, Palm has about 74 percent of the market, and analysts expect that lead to hold for the next few years.
''Palm has a lot of momentum, and it's going to be an uphill battle,'' said PC Data Senior Analyst Mark Bates.
Shortages
Short supplies of parts, such as screens for Compaq's iPaq Pocket PC device, have caused retailers to start waiting lists for the products. The $499 iPaqs are selling for more than $600 on Internet auction site eBay Inc.
The shortage of Microsoft-powered organizers, particularly iPaq, represent a missed opportunity for the software maker to gain share, analysts said. This year, Santa Clara, California-based Palm's devices also were in limited supply because of component shortages, meaning Microsoft could have taken advantage if there had been enough of its organizers to fill the gap.
Handheld parts must be ordered six to eight months in advance, said Phil Holden, director of the Mobile Devices Division at Microsoft. So-called original equipment manufacturers Compaq and Hewlett-Packard, also known as OEMS, weren't prepared for this kind of demand, perhaps wary of the past failure of Microsoft's software for handheld computers.
''The OEMs didn't appreciate the product they had,'' Holden said. ''I think we could sell half of a million a month if they were available. It's incredibly frustrating to me as a marketer.''
If not for supply shortages, Gartner Group Inc. analyst Ken Dulaney said Microsoft-based products would now account for 17 percent of the market instead of 13 percent his firm estimates it has now.
Gaining Share
Gartner is predicting that devices like the current Palms, most of which provide functions like calendars and address books, will wane in popularity as users seek organizers with more capabilities. The newest Microsoft Pocket PCs offer desktop-like features such as word processing, spreadsheets, a full Web browser and the ability to read electronic books and play MP3 music files and video downloaded from the Internet.
''We are predicting the death of single-function devices,'' Dulaney said. ''Palm got caught up with the IPO and changing managers and they have done very little to their software since the beginning. They need to do more.''
Dulaney and others said Microsoft's features will be a key selling point with companies that already use other Microsoft PC and server programs that can share data easily with the handhelds.
By 2004, IDC's Burden expects Redmond, Washington-based Microsoft to have almost 40 percent of the market, compared with 51 percent for Palm.
Burden said Palm's older operating system software will make large corporate customers wary, and could relegate the company to home, academic and individual users.
Even with the shifting market share, the overall pie is growing. Gartner estimates there will be 9.4 million handheld devices worldwide at the end of 2000, surging to 33.7 million by 2004. Unlike Microsoft, Palm makes both hardware and software, which it also licenses to companies like Sony Corp. and Handspring Inc.
Simple Approach
Palm says it's confident in its approach of using simpler software with fewer features to save battery power and cut size and weight. Company officials say the proof is that so far, consumers prefer the smaller, lighter Palms to feature-laden Pocket PCs.
''The marketplace seems to be showing that we are right,'' said Michael Mace, Palm's chief competitive officer. ''People do care about features, but the features they care most about are battery power, size and weight. It's better to give people the basic platform and let them add software.''
Mace cited PC Data sales numbers that show Palm outselling Microsoft-based devices by a ratio of 14-to-1 in September, compared with 12-to-1 in September 1999.
Microsoft's Holden is undeterred.
''Palm may always be the leader in the electronic Filofax market, but we are focusing our efforts on customers that want to get a lot more from the device,'' he said.
New Rival Emerging
Dulaney cautioned that the game could change when Symbian Ltd., a joint venture of the world's top cell-phone makers, enters the market with wireless-enabled handheld devices. Palm and Microsoft offer some services and products for handheld wireless access and plan to introduce more in coming months. Even so, Dulaney expects Symbian to have 15 percent of the market at the end of 2002.
In the meantime, Microsoft still lags Palm by a huge margin -- a fact that Holden says Microsoft Chief Executive Steve Ballmer often ''yells'' at him about.
In an interview, Ballmer pledged that the company will keep pushing until Microsoft takes the lead in the handheld market.
''I think we have a winning product, but I sure wish we were starting from the front of the pack instead of behind Palm,'' he said. ''We'll work hard to catch up.''
In a fast-growing market like handheld organizers, where users replace their products every few years and functionality is paramount, Palm's lead may not have as much significance as the company would like, Gartner's Dulaney said.
''This market has no loyalty,'' he said. |
