Does Dell have PDAs in hand?
Computer king's next move may be into handhelds
By Rex Crum, CBS.MarketWatch.com
Last Update: July 25, 2002
AUSTIN, Texas (CBS.MW) -- There may be five months left until Christmas, but that doesn't mean it's too early for Dell Computer to be thinking about what products it wants to have on the shelves during the holiday season.
And it appears one of those stocking stuffers could be the first personal digital assistants to bear Dell's name.
Dell (DELL: news, chart), which has made no secret of its goal to expand beyond the desktop and into more consumer goods, reportedly has a deal in the works that would have Compal Electronics, a Taiwan-based manufacturer, produce 1.5 million Dell-branded personal digital assistants, or PDAs, and put the Austin, Texas-based computer giant in the PDA market this fall in order to take advantage of the Christmas buying season.
Walter Winnitzki, a hardware analyst with First Albany in New York, said Dell put out a request for proposals to build PDAs with several Taiwanese equipment makers and that there are indications Compal will begin building the devices soon. Winnitzki said the PDAs would run Microsoft's (MSFT: news, chart) Windows CE operating system.
"It's (Dell's PDA plans) all tied to feeding off its PC business," Winnitzki said. "And Dell's very good at waiting for (product) standards to develop before getting into a new market."
Mike Maher, a Dell spokesman, would not confirm that Dell was about to get into the PDA game, but said, "We are looking at that market and a variety of (other) product categories."
Dell reportedly wants to build a color-screen PDA that would cost $299, but it remains uncertain if the company could achieve that price point in a high-performance device that can appeal to both new and recurring PDA customers.
"It they are able to do that, and it's a neat product, they could slap Hewlett-Packard upside the head," said Rob Enderle, hardware analyst with Giga Information Group in San Jose, Calif. Enderle said he put the odds on Dell having its name on its own PDA by the end of the year at "a little better than 50-50."
Dell has been a sort of a proxy player in the PDA arena for some time. The company resells devices from Research in Motion, and has given away Palm handhelds as promotions with the purchase of some of its personal computers.
However, If Dell does enter the PDA market on its own, it would come at a time when hand-held prices are dropping, competition is becoming fiercer than ever, and Dell itself is preparing for battles with Hewlett-Packard (HPQ: news, chart) over printers and other products. On Tuesday, H-P pulled the plug on selling printers to Dell due to Dell's plans to enter the printer market.
And on Thursday, PDA leader Palm (PALM: news, chart) fired another shot in the PDA price war, cutting the prices on several models, including its m105 handheld, from $149 to $99.
However, the PDA market has grown so competitive, and suffered from the slowdown in IT spending that even Palm has lost market share, according to research firm Gartner Dataquest. Analyst Todd Kort said that Palm's U.S. market share fell from 58.7 percent in 2000 to 47.1 percent in 2001. Palm's closest competitor, Handspring (HAND: news, chart) also saw its share of the U.S. PDA market drop from 20.1 percent in 2000 to 19.7 percent last year.
"The U.S. market is in decline," said Kort, who estimated that PDA sales in the U.S. would likely fall to 6.1 million in 2002 from 6.5 million in 2001. "There's just not a great deal of incentive for people with a 2- or 3-year-old Palm to upgrade."
Kort said part of that reason is that there is a sense that consumers feel like they should just wait to buy a so-called smart phone, or other device that comes with the capabilities of a PDA and a mobile phones. He added that Handspring is already moving into the smart phone market and away from traditional PDAs.
However, despite industry obstacles, analysts believe that if any company, starting basically from scratch, can make an impact in the PDA sector, it is Dell.
"A lot of what's going on (in PDAs) plays to Dell's advantages," said Winnitzki of First Albany. "Big things are part of Dell's character and what it excels at. They wait for continuity to come along in an industry and then they move in."
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Rex Crum is a reporter for CBS.MarketWatch.com in San Francisco. |
