Personal Digital Assistant and Mobile Phone Predictions, 2003

Transcription

1 Personal Digital Assistant and Mobile Phone Predictions, 2003 Dataquest Predicts Abstract: In 2003, Pocket PC prices will fall 16 percent, over 30 million mobile phones integrating a digital camera will be sold, and smart phones will comprise less than 5 percent of mobile phone shipments. By Todd Kort Strategic Planning Assumptions Rapid PDA price erosion should not be a factor from 2004 through 2006 because of improved specifications and enhanced capabilities (0.7 probability). By 2005, at least one-fourth of all mobile phones shipped will integrate a digital camera (0.7 probability). Smart phones will comprise less than 10 percent of worldwide mobile phone shipments in 2005 (0.7 probability). While Microsoft's Windows CE licensees will continue to gain share in the enterprise PDA market, Palm OS will continue to dominate the consumer market and should extend into new market segments that will enable Palm OS to maintain its 50 percent unit market share in 2003 (0.6 probability). Publication Date: November 6, 2002

2 2 Personal Digital Assistant and Mobile Phone Predictions, 2003 Introduction The following document provides Gartner Dataquest's key predictions for the personal digital assistant (PDA), mobile phone and notebook computer markets, followed by its expected impact in 2003 and recommendations as to how to react. Gartner Dataquest Perspective Prediction No. 1 Dell's Entry Into the PDA Market Will Lower the Worldwide Pocket PC ASP by 16 Percent in 2003 Dell will enter the Pocket PC market in November 2002 with aggressively priced models that provide similar functionality to some other Pocket PC models that currently cost twice as much. Dell's low operating expenses and ability to promise its manufacturing partner high-volume production runs with highly standardized components have enabled them to undercut the prices of other PDA vendors. The Pocket PC worldwide average selling price (ASP) is about $430 today but will fall about 16 percent to about $360 by the end of Beyond 2003, we expect PDA ASP to continue to decline, but at a slower rate, as an increasing proportion of units are equipped with wireless capabilities, higher resolution displays, more robust security features and so on. The timing of Dell's entry seems right. Consider the following: Microsoft's Pocket PC 2002 profile dictates many standard hardware specifications. This standardized environment plays well to Dell's strengths, and Dell will drive inefficient competitors from the market within the next two years. PDA market leader Palm has suffered from a lack of innovation and is now the same size as it was in early Palm's strength has shifted to the low end of the market, and the new Tungsten models are unlikely to provide much success at $400-plus price points. Palm licensee Handspring has focused on the smart phone market over the past year, and its No. 2 position in PDAs is now a distant memory. PalmSource licensees are facing a transition to Palm OS 5.0 and further enhancements. Many customers may see the low-cost offerings from Dell as an enticement to jump to the other side of the fence and see Microsoft as offering greater platform stability. The merger of Pocket PC market leaders Compaq and Hewlett-Packard finds the new HP in a transitional period with the Jornada models being phased out. HP and Compaq PDA shipments have slumped considerably in the first three quarters of 2002 from year-ago levels.

3 The third-ranked Pocket PC vendor, Casio, is rapidly retreating from the market, and Dell is using Wistron, Casio's manufacturing partner. Year-end budget cycles are about to begin, and Dell has products and prices that will allow IT departments to deploy twice as many Pocket PCs as they could only a few months ago. The downside for Dell is that it could take a year or more for the company to develop a reasonably complete portfolio of PDAs demanded by enterprise buyers. HP and Toshiba will have some models that Dell cannot compete with in 2003, which may give them time to adjust their business models somewhat to cope with Dell. Impact on 2003 Dell's aggressive PDA pricing will reset market expectations and cause significant shifts in vendor market shares in Dell will help the Pocket PC platform become further entrenched in the enterprise market. We expect the Dell entry to signal the start of a shakeout in the PDA market, with several vendors exiting the market within two years of Dell's entry. Other vendors will be forced to pursue niche markets much more aggressively than they have up until now. One unfortunate consequence oftheincreasedfocusonpricingmaybeadeclineinthelevelof innovation in PDAs. Reacting in 2003 Gartner Dataquest is concerned that Dell's entry could freeze the midrange of the PDA market to some extent in the initial months following the launch, because Dell's supply will likely not be sufficient to meet demand. Also, many potential customers may wait until they can get PDAs from Dell rather than buy from other vendors. Prospective customers should carefully weigh the possibility of having to wait several weeks to get a rather generic Dell model vs. the opportunity to obtain other brands and or more fully featured models from other sources within a few days. Prediction No. 2 At Least 30 Million Mobile Phones With Integrated Digital Cameras Will Ship Worldwide in 2003 Mobile phones and PDAs that integrate a digital camera will become a phenomenon in Europe, the Pacific Rim and North America in Wirelesscarrierswillpromotesendingofdigitalphotosasameansof increasing wireless data usage and average revenue per user. The cost of integrating a digital camera of Video Graphics Array (VGA) or lesser resolution into a phone will be relatively insignificant in Digital cameras will add little to the overall weight of the phone, but they will impose some further constraints on battery life and thus talk and standby times. The convenience of having a digital camera at hand at nearly all times will be a tempting feature of new phones. Many of these phones will even include an integrated flash for low-light conditions. The ability to delete or quickly send photos to friends or relatives will prove to be a major sales stimulus in years ahead as costs are reduced further. 3

4 4 Personal Digital Assistant and Mobile Phone Predictions, 2003 Impact on 2003 Sales of low-end digital cameras (2 megapixels or less) will be negatively impacted by the rapid uptake in mobile phones with integrated digital cameras, as well as by falling costs of greater than 2-megapixel technologies. Sending and receiving of digital images via will become much more prevalent, and users will need to learn how to better manage their inbox and filing systems. Users will become more aware of compression technologies and ratios. Use of mobile phones may be restricted in some areas because of privacy concerns. Reacting in 2003 Users will need to become more cognizant of the amount of storage being consumed by and other files that contain images. Network administrators will need to become more vigilant in making users aware of the network bandwidth and storage they are consuming. Rapid increase in usage of rich data types will accelerate network upgrades from Ethernet to Fast Ethernet and Gigabit Ethernet. Subscribers to CDMA 1x and GPRS data services will increase by 25 percent or more in Prediction No. 3 Smart Phones Using Symbian, Palm or Microsoft Smartphone OSs Will Comprise Less Than 5 Percent of the Worldwide Mobile Phone Market in 2003 Conventional thinking suggests that new convergence technologies such as smart phones and wireless PDAs are seeing explosive growth rates. Actually, there was little if any growth in these areas in The average person may believe that it is a relatively simple matter to bring these technologies together in one device and thereby eliminate the need to carry one of the devices, but the reality is that this is complicated and a wide variety of obstacles need to be overcome. Unfortunately, by combining phone and PDA capabilities into a single device, both capabilities are compromised to some extent with the result being neither a great phone nor a great data device. Trade-offs in size, weight, battery life, keyboard, display size/quality, costs and so on must be evaluated by vendors and users. Battery life remains a paramount concern, especially when users have voice and data on a single device. There will be no single smart phone form factor that has universal appeal, but vendors will gradually refine their designs and determine which trade-offs appeal to various user types. PalmSource would seem to have an advantages based on the large number of Palm OS developers and their relatively small operating system (OS) kernel. Symbian has major vendors such as Nokia, Motorola, Siemens and Sony-Ericsson pushing their platform, but it has garnered little third-party software support. Microsoft Smartphone is coming to the game a bit late but has the resources, leverage and will power to become a contender within a year or two. Microsoft could grow rapidly if it can convince enterprises to manage smart phones similar to the way they manage PDAs, notebook and desktop PCs. Microsoft seeks to develop smart

5 phones that can become the corporate standard, issued along with a PC to all new employees. Impact on 2003 Vendors such as Handspring that have bet the company on rapid smart phone market growth will continue to struggle. The high costs of wireless data services in most countries will continue to restrain smart phone market growth. The battle for market share will greatly intensify as Microsoft works with original design manufacturers to produce reference designs for carrier partners to help them challenge established vendors such as Nokia, Siemens, Motorola, Samsung and Sony-Ericsson. Reacting in 2003 The quality and capabilities of smart phones are advancing rapidly, but there is still much room for improvement. Gartner Dataquest recommends that prospective smart phone customers continue to evaluate smart phones, but limit their deployment until standards are better-established, appropriate applications or development tools are available, and improved designs are released that will provide a reasonable return on investment. Prediction No. 4 Palm OS Will Stabilize at About 50 percent of the Worldwide PDA Market in Despite the dramatic lowering of prices on the Pocket PC side of the market that will occur during the next year, the remainder of the PDA market will also migrate downward and Palm OS should be able to capture about 50 percent of all PDA units shipped in There is a huge, relatively untapped market below $100 that is currently occupied by "organizer" products that Gartner Dataquest does not track. In terms of units, the organizer market is probably similar in size to the PDA market. Several million of these are sold each year in China, mostly because of cost considerations and local language support. Organizers are distinguished from PDAs in that they do not use an OS that is supported by third-party software developers, and these devices cannot synchronize with a PC. Palm is the first PDA vendor to directly challenge the wide range of relatively unknown vendors in this market. The Sharp Wizard is probably the best-known brand in the organizer market. Palm recently began going after this market with its first Zire model, priced at $99, but this model is certain to go much lower in While Zire has little appeal to PDA users, its low cost, simplicity and wide range of applications should entice many organizer users into the Palm OS fold. 5

6 6 Personal Digital Assistant and Mobile Phone Predictions, 2003 When lower Pocket PC prices begin to blunt the sales of Palm's new Tungsten models in early 2003, Palm may wake up to the opportunities available in pursuing models specially designed for education markets on a worldwide basis. There is a good opportunity for Palm to take a huge bite out of the calculator market. Integrating Bluetooth in low-end units to enable printing directly through new Bluetooth-enabled printers would be another positive step. So while Palm is likely to see some erosion of its share of the enterprise market, opportunities of similar scale exist, which Palm has only begun to tap. While these opportunities may not be quite as sexy, Palm could make up for this with greater shipment volumes. Likewise, Sony is a force that is beginning to spread its wings to go beyond taking the high end of the Palm OS market. Sony has the engineering talent and marketing strength to become a significant player in the wireless PDA space and will be able to appeal beyond the consumer segment to small-business users and professionals. Sony's insistence on using nonstandard expansion slots probably costs it about 20 percent of its potential sales, but Sony will still contend for PDA market leadership in As battery technology improves in the years ahead, we expect Sony to pioneer a new category of PDAs, which Gartner Dataquest calls "videocentric," which will contrast with voice-centric and data-centric devices. Video-centric PDAs would be heavily used for photos, video, games and so on in addition to providing basic personal information manager (PIM) functions. The new Sony NX70V may be considered the first of these devices. Impact on 2003 Palm will grudgingly cede ground to Windows CE licensees in the enterprise market during the next few years. Palm will aggressively pursue new opportunities at the lower end of the market where it can dominate, and Sony will begin to stretch beyond its traditional consumer focus, allowing the Palm OS to maintain roughly half the PDA market. Reacting in 2003 Gartner Dataquest continues to recommend PDAs from vendors such as HP, Toshiba, Palm and Research in Motion. Dell will join this group later this month. Sony remains an outsider to large enterprise PDA deployments due mostly to its nonstandard expansion slots and failure to develop adequate worldwide service and support operations that are demanded by multinational enterprises. If Sony aspires to become the worldwide PDA market leader, these will be the areas that it will have to improve on. Key Issue At what rate will each computing hardware platform grow or decline in the next five years?

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8 8 Personal Digital Assistant and Mobile Phone Predictions, 2003 This document has been published to the following Marketplace codes: HARD-WW-DP-0381 For More Information... In North America and Latin America: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Worldwide via gartner.com: Entire contents 2002 Gartner, Inc. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice