Compaq set to take handheld revenue lead

Palm Inc. is widely credited with giving the handheld computer credibility in executive offices and therefore in corporate IT organizations. But recent changes in that business are prompting many expert observers to openly wonder what Palm's role will be in providing second generation handheld technologies.

Researcher Dataquest Inc., a unit of Gartner Group, is predicting that Palm could lose its position as top handheld revenue producer as early as mid-summer 2001. Palm will still have a strong lead in the number of units shipped, but Dataquest analysts predict it will lose the revenue leadership to Compaq.

Palm's projected revenue for the quarter ending June 30 is $130 million to $135 million. Though Compaq is expected to sell fewer of its iPAQ handheld PCs during the quarter, the Houston computer manufacturer has a much higher average selling price than Palm or Handspring, another top rival. Compaq appears poised to assume the second quarter 2001 (ending June 30) PDA worldwide market lead on a revenue basis, with revenue exceeding $200 million.

"A growing portion of new users and users who are upgrading want better messaging capabilities, such as access to corporate e-mail, short message services (SMS), wireless LAN (WLAN) or integration of a PDA with a mobile phone. This is especially true of corporate users," said Todd Kort, principal analyst of the Dataquest Computing Platform group. "As better wireless messaging capabilities have become available, many enterprises are considering large volume purchases of PDAs. Palm has little to offer such companies. Palm is well behind the competition in implementing each of these wireless technologies, and this lack of innovation is a big contributor to its declining fortunes."

Gartner analysts said there has been little improved functionality of the Palm OS software since splitting from 3Com in the second quarter of 2000, and this has enabled Microsoft to catch up with Windows CE 3.0. With Microsoft's next version of Windows CE, code named "Talisker" looming at the end of this year, Microsoft may have the necessary ingredients to make a much stronger play for the corporate market.

Palm can close in on Compaq again, say Dataquest analysts, once it starts shipping its next generation operating system in mid-2002, and a replacement for the mainstay Palm VIIx by the end of 2002.

About the Author

Mike Bucken is former Editor-in-Chief of Application Development Trends magazine.