Studies: European companies reluctant to pay for PDAs

European IT managers are reluctant to spend on PDAs (personal digital assistants), and sales of the devices are stagnating, according to separate reports from Dataquest Inc. and IDC. Second-quarter shipments of PDAs and PDA-phone devices in Western Europe were down on the previous quarter and the previous year, the market research companies said.

IDC saw a 21 per cent year-on-year decrease and no improvement on the previous quarter in shipments of PDAs and converged wireless devices, while Dataquest saw shipments of PDAs drop 18 per cent year on year, and 26 per cent on the previous quarter.

While Dataquest excludes PDAs like Handspring Inc.’s wireless-enabled Treo models from its figures because it considers them to be too voice-centric, IDC includes them-and also shipments of converged devices like Nokia Corp.’s 7650, a mobile phone with digital camera, address book and calendar functions.

Putting smart phones like Nokia’s 7650, which runs Symbian Ltd.’s operating system, in the same category as PDAs running PalmSource Inc.’s PalmOS or Microsoft Corp.’s Pocket PC software makes perfect sense, according to Andy Brown, research manager for mobile computing at IDC. IDC is a subsidiary of International Data Group Inc., the parent company of IDG News Service.

“They are all competing for market share,” he said.

However you define the market, the decline in shipments of PDAs and converged devices is in part down to corporate buyers’ reluctance to open their checkbooks, analysts from both companies agreed.

“They don’t have the budget, and they’re not willing to invest in projects with risky assets,” Brown said.

Over the last six months, manufacturers have tried to tempt corporate buyers with a host of new features and models, but they are still putting off purchases, according to analyst Roberta Cozza of Dataquest. Dataquest is a subsidiary of Gartner Inc.

“PDA manufacturers have been stuck in a product approach rather than a solution approach. They really need to educate the sales channel on the benefits that mobile workers can get from these devices,” she said.

Now part of Hewlett-Packard Co. (HP), Compaq Computer Corp. with its iPaq PDAs was the only company to see this, Cozza said. “Compaq is the only vendor that had a corporate focus from the very beginning.”

Palm Inc. has seen its mistake, and is working with IBM Corp. to deliver access to enterprise applications over its wireless-enabled PDAs

“Palm knows it can’t do corporate applications very well,” Brown said. “This has been a tough nut to crack for most of the vendors,”

Cozza agreed, but warned that corporate buyers still care about hardware too.

“It’s a good move, but it needs to be coupled with improvements on the product side,” she said.

However, Palm will have to manage delivery of these product improvements carefully, she said. The company’s sales were hit last year as customers waited for the introduction of new models; the arrival of a new version of its operating system later this year is having the same dampening effect on sales, she said.

Following its acquisition of Compaq, HP is now the market leader in Western Europe, just ahead of Palm, both IDC and Dataquest said.

But to retain this position, HP will have to work on its mid-range products, Dataquest’s Cozza said. “The merger has left a gap in their range, and companies like Toshiba Corp. are taking advantage of that.”

The impact of Japanese companies like Toshiba and Sony Corp. on the corporate market will be limited for now, IDC’s Brown said.

“They’re mainly a retail play. The traditional business user who would buy a device and then expense it back is finding it harder to do so as budgets get tight,” he said.

Whether that expense claim will be easier to slip through as the line blurs between phones and PDAs remains to be seen.

And the line is already blurry. Cozza says the wireless-enabled Handspring Treo is too much a voice device to be included in Dataquest’s figures.

Yet Handspring, which styles itself a “provider of handheld computing products” is putting wireless at the heart of its business strategy, according to IDC’s Brown. Last quarter, 58 per cent of Handspring’s unit sales were of wireless-enabled devices, up from 50 per cent in the preceding quarter, he said.

Converged devices like Nokia’s 7650 are harder to classify. The 7650 looks like a mobile phone (right down to the numeric keypad) but also includes a digital camera and has an address book and calendar functions. Shipments of the 7650 late in the quarter accounted for around 21 per cent of the Nokia shipments recorded by IDC, Brown said.

“Stand-alone devices are going to play a role, but the future is for converged devices,” he said.