Palm low-cost handheld takes aim at scrap paper
NEW YORK, Oct 7 (Reuters) - In a move to expand its market, Palm Inc. (PALM) on Monday unveiled a $99, entry-level handheld computer, hoping that students and casual shoppers will find the low cost digital assistant a better way to stay organized than jotting notes on scraps of paper.
The debut of "Zire," a monochrome, bare bones personal digital assistant, or PDA, comes as Palm, the leader of the market for pocket-sized computers, faces slowing demand, and aims to woo those who never before considered buying a PDA.
That market includes millions of homemakers, small-business owners and those who find managing a computer of any type about as much fun as a trip to the dentist.
While Palm considers its chief rival to be Microsoft Corp. (MSFT) , which develops competing handheld software, it now faces a tougher opponent -- those loose pieces of scrap paper that people use to jot down grocery lists, phone numbers and random thoughts.
"Zire speaks to the 26 million who really want to replace, or at least augment, paper. They are using a combination of day planners or post-it notes, to organize their lives," Palm senior marketing executive David Christopher told Reuters.
Alex Slawsby, an analyst at International Data Corp. (IDC), said it is no simple task to pry people away from their beloved Filofax books or convince them that a $100 computer beats the inexhaustible supply of free scrap paper.
"(Palm) must contend with the killer-application of note taking -- a day planner or a sheet of paper, or whatever people just scribble on and throw in their bag," said Slawsby.
"They have to market this as 'just like paper -- but better.' But if people perceive they have to learn something about computers, there is no success there," he added.
The handheld market has pined for a catalyst for more than a year, as budget conscious consumers weigh the value of the pricey gadgets and corporations trim technology spending.
Research group IDC said second-quarter PDA shipments fell 9 percent from one year ago, and are off 16 percent from the first quarter. Palm held a 32 percent stake in the global market, with Hewlett-Packard Co. (HPQ) at No. 2 with 17 percent.
BATTERIES, GUM ... AND A PALM?
Experts suggest that at $99, Zire will be attractive in the holiday season, as an impulse purchase. In a change from its previous pushes, Palm is marketing the model heavily at major retailers such as Target and Radio Shack, packaged in shrink-wrap plastic and placed in high traffic areas best known for quick buys such as batteries and film.
Moreover, unlike other campaigns where the company stressed megabytes and expandability, Palm will simply say that Zire holds 6,000 addresses and five years of appointments.
Palm has also trumpeted the fact that it can sell this product, whose price stands $300-$400 lower than the introductory price of its high-end models, at a profit.
"The handheld market has seen devices drop into this market when they are end-of-life (and) -- heavily discounted and not carrying good gross margins and profitability," said Palm Chief Financial Officer Judy Bruner. "This product was designed from the ground up to be very profitable at a low price."
She added that Zire's gross margins would likely be similar on a percentage basis to those of the company's high-end products. Overall gross margins for Palm in its recently completed fiscal first quarter was 31.4 percent.
Palm's Christopher also said that there are options for using the device in a corporate arena, such as partnering with companies to hand out the PDAs at conventions, with preprogrammed messages or information, and the ability to be updated via the model's infrared sensor.
Despite optimism for Zire in coming months, the handheld industry, and Palm as its leader, have a nail-biting year ahead in 2003, when a rash of new designs and software will offer consumers myriad reasons to buy a new PDA or upgrade.
Mobile phone makers such as Samsung, Kyocera and Handspring are delivering slimmer mobile phones armed with Palm data management software. In addition, new value-priced models from makers such as HP and ViewSonic will put devices running Microsoft's PocketPC software, a hit with corporate users, in a price range reachable by average consumers.
These more powerful devices, rich in features and sporting color screens, could in time draw attention away from Zire. For that reason, Palm must soon convince new users to abandon their pens and enter the world of digital note taking.
"There is clearly an audience," IDC's Slawsby said. "Whether or not they can convince those people in a pleasant, arm-twisting way remains to be seen." |
