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Friday, 28 June, 2002, 07:12 GMT 08:12 UK
Smart phones a hard sell
Sony-Ericsson smart phone
Smart phone sales have yet to take off

Handheld computer sales are soft. Mobile phone handset sales are slowing, and wireless hype has cooled.

But, device makers and mobile phone manufacturers are looking to so-called communicator devices to entice consumers into replacing their mobile phones and handheld computers with a single device.

Handspring Treo
Handspring's Treo was launched to rave reviews but disappointing sales
Wireless carriers in the US are betting on these devices driving the demand for data services, which they hope will bolster lacklustre results last year.

A lot of players are betting on the devices to give their businesses a boost. The first generation of such devices are flooding the market, but so far demand has been tepid with demand limited to early adopters.

Grim and grimmer

The economics driving the convergence of mobile phones, handheld computers and handheld e-mail devices such as Research in Motion's Blackberry are simple.


Whoever gets the right compromises when it comes to size, functionality and price will see a tremendous upside

Brian Jaquet, Handspring

Handheld sales were off 12.1% annually in the first quarter of this year, and mobile phone maker Nokia recently issued lowered sales outlooks.

Price pressures have depressed margins for both handheld and mobile phone makers, and device and mobile phone makers are looking for ways to differentiate themselves in ways other than lower prices.

In addition, mobile phone carriers are on the hunt for new profits to pay for their next-generation networks, and they think wireless data holds the key for a rebound.

Handheld computer and mobile handset makers are battling to find the right mix of features and size to win the hearts of Road Warriors, those always-on-the-go business people who never want to be out of touch or without their key contacts to close the deal.

Sony Ericsson smart phone study
The phones are smart, but do customers want to pay the price?

For handheld maker Handspring, they see the opportunity to tap into the giant market for mobile phone handsets, which dwarfs the handheld computer market.

From the earliest days of the handheld computer dating back to Apple's Newton in 1992, handheld sales have totalled 30 million units, said Handspring's Brian Jaquet.

But mobile phone handsets sales number in the millions each month. "There is a lot of muscle put behind convergence," Mr Jaquet said.

"Whoever gets the right compromises when it comes to size, functionality and price will see a tremendous upside," he said.

But Mr Jaquet admits that it will take time. Buying a handheld computer for $150 is a much easier decision than buying a handheld computer cum phone that sells for twice that price or more.

Stiff competition, slow sales

Handspring's entry into the market, the Treo, has been met with rave reviews.

But Handspring has a lot of competition not only from other handheld makers but also from mobile phone makers including powerhouse Nokia with its vision of the communicator device in the Nokia 9290.

RIM Blackberry
RIM's updated Blackberry is just one of a number of converged handhelds on the market

Research in Motion, which makes the Blackberry mobile e-mail device, also is in the race. RIM sells a Blackberry that also has mobile phone capabilities.

But so far, sales have been less than stellar. Last year, these all-singing, all-dancing devices sold only 1.07 million units worldwide, according to IT consultancy IDC.

Steve Baker, an analyst with NPD Techworld, is not surprised by the small numbers.

These products are relatively expensive, and the first generation of many products usually attract a limited number of early adopters, he said, adding, "It would be flawed to expect these devices to explode on the scene."

Right now, users are trying to determine what is the right form of these communicators. Every maker of these devices comes at them from a slightly different perspective.


How much demand there will be in the US for a device that does all of these things is a decent question

Steve Baker, NPD Techworld

Handspring's Treo is a handheld computer that has phone and e-mail capabilities. RIM's entry is a Blackberry with phone capabilities, and Nokia's communicator is reminiscent of a Psion handheld crossed with a phone.

Mr Baker adds that these companies are fighting over a relatively small number of people who want all of these capabilities in a single device, and users of such converged devices value voice, e-mail and information organiser capabilities differently, fragmenting an already small market.

"How much demand there will be in the US for a device that does all of these things is a decent question," he said.

But device and mobile phone makers see an opportunity to differentiate themselves and enter into new market areas, less stagnant than markets they now target, he said.

Even if RIM or Handspring are able to get a small percentage of the mobile phone market, there is a lot of opportunity there, he believes.

See also:

02 Jun 02 | Science/Nature
30 May 02 | Business
15 Apr 02 | Business
04 Feb 02 | Business
10 Jan 02 | Science/Nature
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