IDC Says Smart Phones Cutting into Handheld Sales

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Though sales of traditional handhelds grew by double digits during the late 1990s, that growth eventually dropped off and sales actually declined last year. According to market research firm IDC, this is due not just to the decline in the economy but because people are switching to smart phones.

IDC predicts that, in 2003, the worldwide handheld device industry will decline by 8.4% to 11.35 million units. While there will be some growth in 2004, the industry will never reach the point where 20 million handhelds are being sold a year.

However, this doesn’t mean the end for the companies currently making handhelds. Just about all of them are working on smart phones, voice-enabled handhelds, or both. This includes Palm, Hewlett-Packard, Dell, and many more.

While the handheld market is weakening, the market for smart phones is growing. According to IDC, the market will see its strongest year of growth in 2003 as a number of new Symbian OS-powered devices push worldwide shipments beyond 13 million units. “As device aesthetics and functionality improve and end-user prices continue to decline, converged mobile devices are becoming increasingly accessible to the mainstream consumer and are expected to ship in greater numbers than traditional handheld devices for the first time in 2003,” says Kevin Burden, manager of IDC’s Mobile Device research team.

IDC expects market growth to remain strong throughout 2007 as a growing percentage of mobile phones adopt high-end operating systems; a compound annual growth rate (CAGR) of nearly 86% is expected through that year.

In order to attain this level of growth, smart phone makers will need to find ways to overcome U.S. consumers’ lack of interest. A recent study by Jupiter Research found that Americans consider size and voice functions to be far more important than PIM apps, games, cameras, and other advanced features. Given the choice between a free basic mobile phone or buying a smartphone, most U.S. consumers would take the free one, even if the smartphone cost as little as $49.

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