PALM CONTINUES ITS DOMINANCE OVER POCKETPC

[fbara]

Here is something written by Paul Thurrott from Windows 2000 magazine (www.win2000mag.com) about the PPC:

"This week, Compaq announced that it shipped 75,000 PocketPC devices in
the second quarter of this year, and the company plans to ramp up
production so that it can quadruple output by first quarter 2001. But
Windows CE-based PocketPC's run rate is decidedly lower than market
leader Palm's, which shipped 1.1 million devices in the same timeframe.
Even with the other PocketPC makers included in the tally, Palm is
currently outselling the PocketPC by a factor of at least five to one.
And with Palm-compatible devices such as Handspring and Sony prepping
new models for the fall, things aren't looking good for Microsoft's
handheld OS. This week, Compaq CEO Mike Capellas told CNET that his
company would put up a fight and target wireless connectivity.
"The [wireless] delivery of content in a meaningful way will drive
the [handheld] industry," Capellas said. "There is going to be a ton of
new Internet content, and that is . . . going to drive the Web." As for
demand, Capellas notes that Compaq hasn't been able to keep up.
PocketPC devices, which normally retail at $500, have been selling for
as much as $1000 on auction sites like eBay. Compaq has had trouble
obtaining the screens the company needs from suppliers and agrees that
it could have done a better job meeting the demand.
PocketPC users are largely enthusiastic about the devices, in a
manner similar to old Amiga and Macintosh customers. PocketPCs sport
brighter, more colorful screens than their Palm equivalents and are far
more feature packed. But critics note that these features increase the
devices' size, weight, and complexity, not to mention the cost.
Software is also a critical component of any platform's success, and on
that note, the Palm is the clear victor. But Microsoft has a history of
fine-tuning products over time, and the company certainly has the cash
reserves to keep Windows CE afloat indefinitely, if necessary. With
close partners such as Compaq and Hewlett-Packard providing much-needed
publicity for the devices, it's remotely possible that a future release
could finally even the score."

[Berylium]

You know IBM used to dominate the world too, but in typewriters. IBM had everything going for them, having destroyed all competition. Suddenly, the PC popped up. "No problem", says IBM, "PCs are way too expensive and bulky and difficult to use. We have nothing to fear there."
Skipping the melodrama, in David and Goliath esque fashion IBM got there ass handed to them by the advent of cheaper, faster PCs with its killer app: Word Processing.

Obviously the Palm vs. WinCE battle is not exactly similar but it does have many similarities. A company dominating its field that believes a very slow product evolution is all that's necessary, with little to no fear of its competition because their competition is going for a "different" market. Meanwhile the competition has had a rough start, essentially two missfires before getting a good, usable product out. A usable product that is technically superior and evolving quickly.

There are a lot of "what ifs" about the future, but my opinion is this... Palm is looking very much like the IBM of old sans a few very important details. One, Palm is branching out and allowing others to produce like products, unfortuantely, even these new products aren't the evolution the platform needs. Two, and the most important difference is the rumor of quasi-near future Palms supporting a new, faster processor that could well handle a full load of multimedia tasks. Despite Palm's cry and the cry of many Palm fanatics that simpler is better, multimedia functionality is going to play a bigger and bigger role in the evolution of hand held PCs, and I have never understood why Palm can't make a powerful, yet simple product that can handle the tasks a Palm does very well and have the multimedia features to boot. Hopefully a new breed of Palms will make that leap.
In the opposing corner we have Microsoft. (We also have Psion, Linux, etc. but that's not in discussion right now) Were I Palm I would be VERY afraid of Microsoft. Even though Microsoft also has a history of being slow to evolve its product line once it has become the standard, it's the way Microsoft products become the standard that should scare Palm. Essentially we have a company that can become extremely motivated and throw virtually unlimmited money behind their idea until it gets the recognition and following it needs to dominate.

So I would take earnings reports and sales tallies with a grain of salt right now. PDAs, or Handheld PCs, are going to become VERY important business and personal tools in the next few years, much more important than they are today, there's no telling what their uses will be. We are only in the first leg of a long race here and even though Pocket PCs are behind they did get a late start and there's no telling what the future could hold.


-Berylium


I understand this whole argument can be reversed by saying Palm is the David to Microsoft's Goliath but in the PDA arena that is simply not the case, and the PDA arena is ALL I'm comparing here.

[This message has been edited by Berylium (edited September 25, 2000).]

[TinMan]

This week, Compaq announced that it shipped 75,000 PocketPC devices in the second quarter of this year...

Assuming a calendar year, the second quarter ended June 30th. That would mean Compaq was producing iPaqs at the rate of 25,000 per month before they actually hit the street (err, net). This also means they sold EVERY iPaq, at the very end of the second quarter. How many would have been sold, had demand (hence, supply) been properly accounted for?

Further, this would mean, assuming they still sell every iPaq they make, that Compaq would have sold another 75,000 in July, August, and September. Another 50,000 for October and December (combined), and whatever number they get production ramped up to for December (50,000?). All totaled, we should see at least 250,000 iPaqs sold before the end of this year (unless Compaq manages to increase production sooner).

Plus, iPaq-mania has seemingly caused a surge in interest in all Pocket PCs, so I suspect their numbers won't be too bad either. IMO, Pocket PCs are going to catch on faster than most media pundits realize (since they, apparently, are still looking at the Pocket PCs as if they were last year's incarnation: WinCE PsPCs).

Finally, all of this is about numbers of units sold, not revenue. Consider the price of the iPaq Vs. the average selling price of Palms (I believe the average is in the neighborhood of $240.00). This means that revenue-wise, 250,000 iPaqs equal 500,000 Palms. Once again, add in the other Pocket PC makers--who also have a higher per-unit price than Palm--and you can see the Pocket PC is far from a failure.

I think the days of Palm's total domination of the PDA market are clearly numbered. Will Palm disappear? Hardly, but I definitely expect the market to equal out.


-Mike Lynch

[This message has been edited by TinMan (edited September 28, 2000).]

[wxguide]

Amen guys!
Based on what Cappellas has said, and what has been reported thus far on the iPaq's sales, we're looking at 300,000 iPaqs per quarter by second quarter next year.

Considering the current iPaq market share of 6.6%, quadruple that, and you have roughly 25% of the market share in the handheld market by second quarter 2001. This is exciting stuff gentlemen!

Paul