Worldwide Handheld Devices Market Undergoes Third Consecutive Quarter of Decline, According to IDC

FRAMINGHAM, MA – October 27, 2004 – The worldwide market for handheld devices experienced its third successive quarter of year-over-year decline in the third quarter of 2004. Despite strong shipments from top five vendors Hewlett-Packard and Dell, the market continued to shrink due to a drop in shipments from market leader palmOne and the ongoing withdrawal of former number 3 vendor Sony. According to IDC's Worldwide Handheld QView, device shipments decreased 4.6% sequentially and 8.7% year over year in 3Q04 to 2.1 million units.

Consolidation in the worldwide handheld device market continues with the exit of top vendors Sony and Toshiba from international competition nearly complete. Meanwhile, lower barriers to entry are enabling companies with established core competencies in electronics design and manufacturing to enter the market and quickly gain share, although this share comes at the expense of margins in the face of a flat or slightly shrinking market. As a result, success in the handheld market is increasingly equated with the ability to develop solutions that extend the handheld device into markets beyond core personal information management (PIM) functionality.

"In the face of intense competition from converged mobile devices capable of performing basic personal information management tasks, the worldwide handheld device market continues to struggle to evolve beyond its primary role as a PIM device," said David Linsalata, analyst in IDC's Mobile Devices program. "It is crucial that vendors push handheld devices into new market segments through the integration of existing technology such as GPS bundles in order to energize this market and return it to a growth path."

Vendor Highlights

— palmOne – Market leader palmOne experienced a decline in shipments of 12.7% year over year and 20.3% sequentially, bringing the company's share down 6.9% points to 34.7%. The company expects stronger handheld growth in the next quarter, given palmOne's typically strong sales during the holiday season.

— Hewlett-Packard – Thanks to a refreshed lineup across both its business and consumer portfolio, HP's shipments increased 11.7% year over year and 22.4% sequentially. This boost brought HP to within 5 percentage points of market leader palmOne, an increase of 6.7% from the second quarter.

— Dell – Continued sales of the x30 helped Dell to increase 44% year over year and 29.7% sequentially, bringing Dell's market share up 2.3% to 8.9% of the worldwide handheld device market. With the recent release of the x50 and the company's strong direct-sales model, Dell looks well positioned for the fourth quarter of 2004.

— MiTAC – Similar to Medion before it, MiTAC has entered the top 5 after a relatively short time in the handheld device market thanks to a focus on quality low-cost handheld devices. MiTAC increased its shipments 1007.9% year over year and 210% sequentially, giving the company a 3.2% market share.

— Sony – As was to be expected from the company's decision earlier in the year to withdraw from all markets except for Japan, Sony's shipments declined 81.5% year over year and 74.8% sequentially. This decrease brought Sony's market share down 5.8% to 2.1%.

Top 5 Vendors, Worldwide Handheld Device Shipments and Market Share,

3Q 2004 (Preliminary)

Rank Vendor 3Q 2004 Shipments 3Q 2004 Market Share

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1 palmOne 736,481 34.7%

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2 Hewlett-Packard 648,975 30.6%

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3 Dell 188,200 8.9%

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4 MiTAC 68,500 3.2%

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5 Sony 44,192 2.1%

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Other 436,644 20.6%

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Total 2,122,992 100.0%

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Source: IDC, October 27, 2004

Notes:

— Vendor shipments are branded shipments and exclude OEM sales for all vendors.

— Handheld devices are pocket-sized, either pen or keypad-centric, and are capable of synchronizing with desktop or laptop computers. Handheld devices are designed to access and manage data including office documents, multimedia, and games.

— Handheld devices do not include telephony but may include wireless capabilities that enable Internet access and text communication. These devices feature evolved operating systems or application environments, such as Palm OS, Pocket PC, Windows CE, Handheld PC 2000, Linux or proprietary solutions and have the ability to download and run applications and store user data beyond their required PIM capabilities.

IDC's Worldwide Handheld Qview provides device vendors, software developers, service providers, and component suppliers with timely and accurate information on the worldwide handheld market. The program provides quarterly measurements of worldwide unit shipments and vendor market shares.

For more information about IDC's Worldwide Handheld Qview program, please contact Patrick Gorman at 508-935-4369 or pgorman@idc.com.

About IDC

IDC is the premier global market intelligence and advisory firm in the information technology and telecommunications industries. We analyze and predict technology trends so that our clients can make strategic, fact-based decisions on IT purchases and business strategy. Over 700 IDC analysts in 50 countries provide local expertise and insights on technology markets. Business executives and IT managers have relied for 40 years on our advice to make decisions that contribute to the success of their organizations.

IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. Additional information can be found at www.idc.com

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