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Shipments of personal digital assistants and handheld devices slowed in 2002, but new, aggressively priced products could help turn things around in 2003, analysts say.

Palm Still Leads

Hardware vendors shipped 12.1 million PDAs and other handhelds in 2002, down 9.1 percent from 2001, says Dataquest, a unit of Gartner, in a report distributed Monday. Much like in the PC business, corporations are still not buying as many PDAs as expected amid a technology spending crunch, says Todd Kort, principal analyst for Dataquest.

Shipments of Palm's PDAs dropped 12.2 percent in 2002, but Palm still shipped almost 3 million more units than its nearest competitor, Hewlett-Packard. Palm's 4.44 million units in 2002 represented 36.8 percent of the market, as compared with HP's 1.63 million units and 13.5 percent of the market.

Palm's products, which run an operating system developed by its former division Palmsource, are more popular among consumers due to their lower prices and ease of use, says Stephen Baker, director of research at NPD Techworld. That explains Palm's healthy lead over HP's IPaq devices based on Microsoft's Windows Pocket PC operating system, since 70 percent of all handheld sales are to consumers, according to Dataquest.

Business purchases of PDAs will climb when the industry figures out a better way to offer wireless data services and resolves security issues to the satisfaction of IT managers, Kort says.

Deals Emerge

While the Pocket PC operating system has seen most of its adoption by businesses, the emergence of cheaper IPaq units and Dell's new Axim PDA could help those devices become more of a factor in the consumer market, Baker says.

In fact, prices are dropping for both Palm and Pocket PC devices. Palm's low-cost consumer PDA, the Zire, has gotten the attention of first-time PDA users, who are badly needed to reinvigorate the market, Baker says.

The third- and fourth-place manufacturers in Dataquest's study both use the Palm OS in their products. Sony enjoyed strong growth of its Clié PDAs with shipments of 1.33 million units in 2002, up 163 percent from shipments of 506,358 units in 2001. Shipments of Handspring's devices dropped sharply to 698,228 units in 2002, down from 1.37 million in 2002. The figures for Handspring do not include sales of its Treo PDA/phone devices, which are considered smartphones.

Toshiba posted the strongest gain among PDA vendors, shipping 450,298 of its Pocket PC-based units in 2002, up from an almost nonexistent 12,000 units in 2001.

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