Handheld Computer Handheld Computer Industry AnalysisIndustry Analysis

Dan HuffDan HuffKim HebbKim Hebb

Kelly JamesKelly JamesMargaret McKinnonMargaret McKinnon

BackgroundBackground

Handheld Computers (PDAs) first Handheld Computers (PDAs) first introduced by Apple in 1993, marketed as introduced by Apple in 1993, marketed as the Newton Message Pad. the Newton Message Pad.

Evolved from handheld electronic Evolved from handheld electronic organizers such as the Psion (1984)organizers such as the Psion (1984)

First PDA’s relied on handwriting First PDA’s relied on handwriting recognition programs and had calendars, recognition programs and had calendars, address books and to-do lists.address books and to-do lists.

Now…Now… Wireless/voice capabilitiesWireless/voice capabilities Digital camersDigital camers MP3 players MP3 players

Source: Xilinx.comSource: Xilinx.com

ProductProduct

The PDA market can be divided The PDA market can be divided into two segments.into two segments. ConsumerConsumer – low cost, user friendly – low cost, user friendly

devices equipped for basic devices equipped for basic information storage and retrieval, information storage and retrieval, i.e. address books and calendars.i.e. address books and calendars.

BusinessBusiness – higher cost devices – higher cost devices focused on business applications focused on business applications such as wireless email and word such as wireless email and word processing.processing.

Sources: Lexis-Nexis and Cyber AtlasSources: Lexis-Nexis and Cyber Atlas

DemographicsDemographics

Who are PDA users?Who are PDA users? Age 21-30: 28%Age 21-30: 28% Age 31-40: 31%Age 31-40: 31% Tend to have higher levels of Tend to have higher levels of

education than averageeducation than average 93% have Internet access at 93% have Internet access at

home, vs. 58% of the general home, vs. 58% of the general population.population.

Men are nearly twice as likely to Men are nearly twice as likely to have a PDA than women.have a PDA than women.

Source: Jupiter Media MatrixSource: Jupiter Media Matrix

US Consumers most Popular US Consumers most Popular Technology DevicesTechnology Devices

1.1. Desktop PCDesktop PC

2.2. Mobile PhoneMobile Phone

3.3. Nintendo® gaming systemNintendo® gaming system

4.4. SonySony®® PlayStation or PlayStation II PlayStation or PlayStation II

5.5. Laptop PCLaptop PC

6.6. PagerPager

7.7. PDAPDA

8.8. Sega® DreamcastSega® Dreamcast

Popular FeaturesPopular Features

Calendar / Address Book Calendar / Address Book Wireless emailWireless email Business ApplicationsBusiness Applications

Word ProcessingWord Processing SpreadsheetSpreadsheet

Wireless InternetWireless Internet Location-based services (i.e. Location-based services (i.e.

traffic, weather, driving directions)traffic, weather, driving directions)

Source: CyberAtlasSource: CyberAtlas

Consumer Purchasing Consumer Purchasing BehaviorBehavior

53% of users purchased their 53% of users purchased their PDA for themselves.PDA for themselves.

27% received their PDA as a 27% received their PDA as a gift.gift.

20% received their PDA from 20% received their PDA from their employer.their employer.

Source: NPD IntelectSource: NPD Intelect

Channels of DistributionChannels of Distribution

Two Major Two Major ChannelsChannels Traditional Traditional

Retail Store Retail Store E-Commerce E-Commerce

StoreStore

Category ASP and Category Share, in units and dollars

Traditional Store ASP

E-Commerce ASP  

  $271.00     $293.00  

           

Channel Share: Traditional E-Commerce  

 88.2% unit

share  11.8% unit

share

 85.6% dollar

share  14.4% dollar

share

Source: IDC ResearchSource: IDC Research

Market Sales and GrowthMarket Sales and Growth

About 6.1 mil personal digital About 6.1 mil personal digital assistants were shipped to retailers assistants were shipped to retailers in 2000, up 50% vs previous year; in 2000, up 50% vs previous year; sales may reach 9.6 mil units in 2001 sales may reach 9.6 mil units in 2001

61.5 million people will be using 61.5 million people will be using wireless devices to access the wireless devices to access the Internet in 2003, up from 7 .4 million Internet in 2003, up from 7 .4 million in the US today, according to a new in the US today, according to a new report from IDC Research. The report from IDC Research. The growth represents a 728 percent growth represents a 728 percent increase.increase.

www.cesinc.com/company/factsheet.html www.cesinc.com/company/factsheet.html

Other Market Growth PredictionsOther Market Growth Predictions

Leading computer research firm Leading computer research firm estimates that annual sales in estimates that annual sales in the handheld market will more the handheld market will more than triple from 5.4 million units than triple from 5.4 million units worldwide in 1999 to 18.9 million worldwide in 1999 to 18.9 million units in 2003. units in 2003.

NPD Intellect NPD Intellect

Other Market DataOther Market Data

The U.S. market for handheld The U.S. market for handheld computers doubled to more than $1 computers doubled to more than $1 billion. Revenues from selling billion. Revenues from selling personal digital assistants, such as personal digital assistants, such as Palm organizers and Pocket PCs, Palm organizers and Pocket PCs, totaled $1.03 billion in 2000, more totaled $1.03 billion in 2000, more than twice the $436.5 million sold in than twice the $436.5 million sold in 1999. In terms of per unit sales, 1999. In terms of per unit sales, manufacturers sold 3.5 million manufacturers sold 3.5 million devices in 2000, over two-and-a-half devices in 2000, over two-and-a-half times the 1999 figure of 1.3 million. times the 1999 figure of 1.3 million.

IDC Research IDC Research

Seasonal DataSeasonal Data

Sales are strong for the Sales are strong for the handheld industry for the week handheld industry for the week ending 23 November in a ending 23 November in a Holiday Season that is seen Holiday Season that is seen critical for handheld critical for handheld manufacturers following a drop manufacturers following a drop in demand for handheld in a in demand for handheld in a year affected by the slowing year affected by the slowing down of the global economy and down of the global economy and the US entering a recession. the US entering a recession.

Source: CyberAtlasSource: CyberAtlas

Market ShareMarket Share

The handheld The handheld computer industry has computer industry has a number of a number of competitors.competitors.

Market dominated by Market dominated by Palm. The Palm V is Palm. The Palm V is the most popular PDA.the most popular PDA.

There are constant There are constant new entrants to the new entrants to the market. market.

Market Share

Palm 29.70%

Handspring 13.90%

Compaq 7.30%

Casio 5.60%

Hewlett-Packard 5.30%

Minren 5.10%

Others 33.00%

Sources: www.allnetdevices.com and IDCSources: www.allnetdevices.com and IDC

International MarketsInternational Markets

Despite tighter inventory controls and Despite tighter inventory controls and aggressive pricing, the European market aggressive pricing, the European market for handheld devices (including PDAs and for handheld devices (including PDAs and Smartphones) declined 30.2% in the final Smartphones) declined 30.2% in the final quarter of 2001. This result was artificially quarter of 2001. This result was artificially low, however, due to high levels of low, however, due to high levels of shipments into the distribution channel in shipments into the distribution channel in the same period of 2000, and full year the same period of 2000, and full year results showed a growth of 8%. results showed a growth of 8%.

Little Asian market information – optimistic Little Asian market information – optimistic view for general wireless marketview for general wireless market

State of MarketState of Market

Palm is holding on to #1 position Palm is holding on to #1 position despite intense competition from despite intense competition from Handspring and MicrosoftHandspring and Microsoft

Strategic alliances with wireless Strategic alliances with wireless phone companies like Sprint phone companies like Sprint PCS are allowing faster PCS are allowing faster introduction of PDA’s with phone introduction of PDA’s with phone capabilitiescapabilities

State of MarketState of Market

Major price declines and Major price declines and consolidation in ’02 because…consolidation in ’02 because… More than 20 vendors vying for More than 20 vendors vying for

market sharemarket share Little to no differentiationLittle to no differentiation Weak economyWeak economy Lack of mature applicationsLack of mature applications

Source: Hardware Platform Market Predictions for 2002; Leslie Fiering; Gartner; 17 December 2001

State of MarketState of Market

Competition increasing as many Competition increasing as many successful computer hardware successful computer hardware manufacturers facing low manufacturers facing low margins are entering the marketmargins are entering the market ToshibaToshiba CompaqCompaq

Business market segment Business market segment gaining more attentiongaining more attention SizeSize Revenue growthRevenue growth

State of MarketState of Market

New applications (instant New applications (instant messaging) are helping to drive messaging) are helping to drive marketmarket

Source: Wireless LAN: The Next Killer Application; 17 May 2001; Mostafa Maarouf; Gartner, Inc.

Sources: Company websitesSources: Company websites

Average Retail Price (by Average Retail Price (by Brand)Brand)

Palm-$99-$399Palm-$99-$399 Handspring-Treo $399-$599;Handspring-Treo $399-$599;

Visor $250Visor $250 Compaq-iPAQ$399-$599Compaq-iPAQ$399-$599 Sony-Clie $199-$449Sony-Clie $199-$449 Casio-Cassiopeia $599Casio-Cassiopeia $599 H-P-Jordana $449-$899H-P-Jordana $449-$899

Source: The Gartner GroupSource: The Gartner Group

Seasonal Pricing TrendsSeasonal Pricing Trends

The average price of a handheld The average price of a handheld sold in US retail stores during sold in US retail stores during the holidays was $218 the holidays was $218 compared with about $260 a compared with about $260 a year ago. year ago.

Major CompetitorsMajor Competitors

PalmPalm-Leading manufacturer of handheld microcomputers; developer of related personal information management, operating systems, API, web-clipping and handwriting recognition. The handwriting recognition software recognizes handwriting and transcribes the written text into typed text. Also sell accessories, etc on website. Market leader, with most popular PDA, the Palm V.

HandspringHandspring-The Idea: To fundamentally change the way people organize, manage and communicate. Executive team that launched the Palm Pilot. The PalmPilot™ sold faster than the VCR, the color TV, the cell phone, even the personal computer. Now, moving from making traditional PDA’s to only making wireless-enabled handheld computing devices. Developing partnerships with platform vendors to market Treo (new wireless device) in its enterprise space. First PDA player to introduce handheld computing device with voice capabilities, in the Treo.

CompaqCompaq-Designs, manufactures, and markets commercial desktop, portable products, and consumer pc’s (among many other related products). Customers range from business interests, home users, and govt and educational users. Handheld product is iPAC. The Microsoft® Windows® Powered iPAQ Pocket PC puts the power of a desktop PC in a sleek little to-go box that gives you access to Microsoft Pocket applications like Internet Explorer, Outlook, Word and Excel. Consumer price $399 to Consumer price $399 to $599.$599.

CasioCasio--Manufacturer of the CASSIOPEIA pocket PC. Newest model is E-200, which operates using Microsoft© Windows-Powered Pocket PC 2002 software, allows users to connect to a variety of wireless network products and accessories to create a complete mobile office environment. The E-200 includes many new features designed to improve performance, ease ofuse and optional wireless connectivity for demanding Mobile Professionals, Corporate and Government Markets. Retail Price $599.00

H-PH-P-Products include desktops and workstations, handheld computers, mobile products, printing and digital,storage, servers, networks, and software. The Jordana, “simplicity in the palm of your hand”, handheld and pocket pc, retail from $449 to $899.

Newer EntrantsNewer Entrants

AcerAcer-Thai Computer company, launched first PDA in Thailand earlier this month. Positioned as affordable alternative Palm. Uses Palm OS 4.1 and boasts largest internal memeory capacity of any PDA with 16 megabytes. Targets 24-35 yrs, middle income, young exec’s and tech-savvy.

SonySony-Holding company with subsidiaries which (among other things) develop, manufacture and sell electronic equipment, now including handheld computers, called Clie. Use Palm O/S and feature many upgrades. Retail from 199 to 449. Called personal entertainment organizer.

SharpSharp-Entertainment, applicances, business, mobile. Most well known for home electronics, like TV’s. New product, Zaurus, is expected to launch early this year. “The Sharp Zaurus combines state-of-the-art Sharp technology and Sharp innovation to deliver a unique and compelling PDA solution.” Will be relatively high priced, between $500-600.

ToshibaToshiba-Products include portables, DVD, telephones, storage, medical imaging, and digital cameras. New product, Genio. Current product, pocket pc e570.

HitachiHitachi-Families of products include,consumer, electronic, industrial, power, information systems, and materials. Will enter market later this year with product based on Windows CE. Net. Will first be commericalized in Japan for corporate users.

Royal Consumer Information Products-Royal Consumer Information Products- A division of Olivetti Office USA. Unveilded the Royal Linux PDA at the this year’s CES show. Is expected to hit streets next quarter. Based on same Intel processor as Compaq iPAQ and HP Jordana. Price $299. Currently manufacture daVinci and Vista models.

Competitor Business Competitor Business StrategiesStrategies

ToshibaToshiba Direct selling to Direct selling to

business customersbusiness customers Understands the Understands the

importance of importance of wireless technologywireless technology

Understands Understands limitations of their limitations of their own operating own operating systemsystem

Making the right Making the right partnershipspartnerships

Competing head-on Competing head-on with Compaq and is with Compaq and is expected to expected to overtake iPAQovertake iPAQ

PalmPalm New focus on New focus on

business customersbusiness customers Strong operating Strong operating

systemsystem Strong software Strong software

customerscustomers Strategic alliances Strategic alliances

with several with several handheld handheld manufacturersmanufacturers

New plans for OS to New plans for OS to compete against compete against Microsoft’s Microsoft’s Windows CE and Windows CE and Pocket PCPocket PC

Competitor Business Competitor Business StrategiesStrategies

HandspringHandspring Focus on business Focus on business

customerscustomers Plans to offer Plans to offer

choice of Palm’s choice of Palm’s OS and Microsoft’s OS and Microsoft’s Pocket PCPocket PC

HitachiHitachi New focus on New focus on

business customersbusiness customers Leveraging Leveraging

stronghold in Japan stronghold in Japan before releasing in before releasing in USUS

Source: Standard & Poor'sSource: Standard & Poor's

Competitor Ratio Analysis Competitor Ratio Analysis (PDA Industry Only)(PDA Industry Only)

Ratios Palm H-spring

Current 1.634 1.451

Quick 1.137 0.93

Total Debt/Equity 76.7 74.4

Net Sales/Inventory 14.463 129.837

Return on Assets -27.5 -49.7

Return on Sales -22.9 -34

Return on Net Worth -48.6 -86.8

Current News, etc…Current News, etc…

Technological BreakthroughsTechnological Breakthroughs Instant messaging is better Instant messaging is better

alternative to e-mail for most alternative to e-mail for most consumersconsumers

Microsoft Windows CE.net is Microsoft Windows CE.net is creating next generation of creating next generation of programmable, intelligent handheldsprogrammable, intelligent handhelds

Can be connected to internet, integrate Can be connected to internet, integrate with PCs and backend serverswith PCs and backend servers

Current News, etc…Current News, etc…

Technological BreakthroughsTechnological Breakthroughs Toshiba’s MPEG4Toshiba’s MPEG4

Stream movie trailersStream movie trailers Traffic and weather reportsTraffic and weather reports Short video clipsShort video clips

Source: SiliconValley.com; Dawn C. Chielewski;

Future Outlook…Future Outlook…

Good enterprise applications, Good enterprise applications, and strong solution partners are and strong solution partners are key to survival key to survival

Growing speculation of Palm Growing speculation of Palm and Handspring merger in 2002and Handspring merger in 2002 Decrease cutthroat competitionDecrease cutthroat competition Reduce costsReduce costs Improve shareholder valueImprove shareholder value

SourcesSources

www.palm.comwww.palm.com www.handspring.comwww.handspring.com www.sony.comwww.sony.com www.compaq.comwww.compaq.com www.hp.comwww.hp.com www.sharpelectronics.comwww.sharpelectronics.com www.toshiba.comwww.toshiba.com www.casio.comwww.casio.com www.hitachi.comwww.hitachi.com www.royal.comwww.royal.com www.uscensus.comwww.uscensus.com

SourcesSources Miyake, Kuriko. “Hitachi Unveils Plans for PDA,”

www.pcworld.com, January 9, 2002. Pastore, Micheal. “PDA Market Slow in Q3,”

www.cyberatlas.internet.com, December 26, 2001. Gray, Douglas F. “CES-Royal touts low-cost Linux PDA,”

InfoWorld Daily News, January 11, 2002. “Product Launch: Acer aims high with PDA,” The Nation

(Thailand), January 12, 2002. “Handspring Trips on Treo Timetable,” Communications Today,

January 17, 2002. “Handspring Plans wireless Move, Posts Q2 Loss,”

ComputerWire, January 16, 2002. Palm, Inc. Standard & Poor's Corporate Descriptions plus News,

Copyright 2002 The McGraw-Hill Companies, Inc. January 14, 2002

Ibid, Handspring.  Hart, Tole. “Telecommunications TeleViews,” Gartner, Inc. 18

January 2001. Maarouf, Mostafa. “Wireless LAN: The Next Killer Application,”

Gartner, Inc. 17 May 2001; Chielewski, Dawn C. SiliconValley.com.

SourcesSources

““Personal Digital Assistants” Personal Digital Assistants” DSN Retailing TodayDSN Retailing Today Vol. 40 Iss. 7 Vol. 40 Iss. 7 Pg. 31Pg. 31

IDC Research – www.idc.com IDC Research – www.idc.com www.cesinc.com/company/factsheet.html www.cesinc.com/company/factsheet.html NPD Intellect – The NPD Group www.npd.comNPD Intellect – The NPD Group www.npd.com Stockton, Jeffrey. “Can the wireless Net Succeed in China?” Stockton, Jeffrey. “Can the wireless Net Succeed in China?”

www.allnetdevices.comwww.allnetdevices.com Pastore, Michael. “Wireless Access Devices Look Toward 2001”, Pastore, Michael. “Wireless Access Devices Look Toward 2001”,

CyberAtlasCyberAtlas, February 16, 2001., February 16, 2001. Franken, Stephanie. “Popularity of Pocket Computer Devices Franken, Stephanie. “Popularity of Pocket Computer Devices

Soars”, Soars”, Pittsburgh Post-GazettePittsburgh Post-Gazette, August 12, 2000., August 12, 2000. Driscoll, Clement. “Are Consumers Interested in Wireless Driscoll, Clement. “Are Consumers Interested in Wireless

Internet Location-Based Services?” Internet Location-Based Services?” RCR Wireless NewsRCR Wireless News, March , March 19, 2001.19, 2001.

www.xilinx.comwww.xilinx.com ““Jupiter NPD Consumer Survey,” Jupiter NPD Consumer Survey,” Jupiter Media MatrixJupiter Media Matrix, June , June

2001.2001.

SourcesSources

Source Information

Company Websites Product, Pricing, and Strategies

Standard & Poor's Corporate Descriptions Company Financials

PCWorld.com New Products

CyberAtlas.com State of the Industry and Forecasts

InfoWorld Daily News Industry news

Communications Today Company Specific information

Computer Wire Company Specific information

Gartner, Inc. Strategic alliances/tech breakthroughs

Silicon Valley.com Technological breakthroughs

IDC Research Market trends/tech breakthroughs

NPD Group Seasonal and Industry figures

DSN Retailing Today Industry figures and growth

www.cesinc.com Industry figures and growth

allnetdevices.com International information

RCR Wireless News Demographic Information

www.xilinx.com Demographic Information

Jupiter Media Matrix Technology trends

Pittsburgh Post Gazette Demographic Information