In the beginning — and for a long time — handhelds were pretty expensive. But recently forces have come into play that are pushing the prices down to rock bottom. And this trend is going to continue in the future.
Price has been a major factor for handhelds since their inception. For instance, Apple’s Newton line, some of the first real handhelds, failed partially because they cost too much. One of the reasons the original Palm Pilot was successful was because of its comparatively low price, just $299.
And Palm continued to lead the pack for years with low-cost devices. For example, the Palm m100 was launched in 2000 at $149. The HP Jornada 548 debuted that same year for $599. Admittedly, the Jornada could do a heck of a lot more, but far more m100s were sold.
Eventually, the handheld market settled into a relatively stable state. Devices running the Palm OS offered fewer features but cost less, while Pocket PCs had more to offer, but also higher prices.
This situation lasted until 2002, when Sony began to get aggressive with its handhelds. It started to offer Palm OS models with color screens and multimedia capabilities at low prices. This caused a bit of shakeup in the market. The other Palm OS licensees — especially Palm — had to develop models with better multimedia capabilities, while the Pocket PC makers had to find ways to charge less for their models. But this was only a hint of what was coming.
The Dell Effect
Dell entered the handheld market at the end of last year, and nothing has been the same since.
The Axim X5 Basic offered what had previously been considered high-end features but for an entry-level price, only $200 after a rebate. This put tremendous price pressure on the competition and we’re still feeling the effects. I sincerely believe that if the X5 series had not been released, every handheld currently available would cost $100 more than it does now.
Let me give you an example of the Dell Effect. Palm debuted the Tungsten T late last year. Not too long after its release, Dell entered the market. Compared with Dell’s $200 Axim X5, Palm’s $500 Tungsten T looked wildly overpriced. A few months later Palm had to admit that sales of the Tungsten T had been lackluster and dropped its price by $100, at which point sales picked up significantly. And notice that the Tungsten T2 cost just $400 when it was released this summer. That’s the Dell Effect at work.
The effects are felt all over the industry, not just at Palm. Without the Axim X5 putting competitive pressure on it, there’s no way Hewlett-Packard would have released the iPAQ h1935 for just $200. This model would have cost at least $300.
And it doesn’t end there. Dell has already said it is working with Good Technologies to develop a cellular-wireless handheld. I predict there will be a version of this that will cost less than $300, maybe much less. Other companies will have to follow suit. Currently, Verizon is charging $600 for the Samsung i700 cellular-wireless Pocket PC. The days when that can happen are rapidly coming to a close… and we have Dell to thank.