RIM's Blackberry Topples PalmOne In Handheld Market

The change was not unexpected, given PalmOne's decision to focus on the nascent smart-phone market with its Treo device, Todd Kort, analyst for Gartner Inc. said. In the last 12 months, PalmOne has only introduced two new handhelds, called personal digital assistants, the Tungsten T5 last fall and the Tungsten E2 last month.

"They have quite a few older (PDA) models on the market and would like you to upgrade to a smart phone," Kort said. "They've abdicated they're position in PDAs in order to try to become a more successful smart-phone vendor. They just don't have the resources to try to fight battles on two fronts."

In the first quarter, PalmOne's shipments fell by 26.3 percent to 614,750 units from 834,591 units a year ago, Gartner said. Its market share plummeted to 18 percent from 30.5 percent.

PalmOne, based in Milpitas, Calif., has led the PDA market globally since the late 1990s, Kort said. Gartner defines a PDA as a data-centric wireless device. Smart phones, on the other hand, are voice centric, but also offer some data services.

In capturing the top slot, RIM increased unit shipments in the first quarter by 75.6 percent to 711,000 units from 405,000 units in the same period a year ago. The Canadian company's market share increased to 20.8 percent from 14.8 percent.

About 90 percent of RIM Blackberry sales are in the enterprise, where mostly senior executives have used it to access e-mail from corporate servers, Kort said. The company, however, has been able to boost sales among salespeople, who are using Blackberries to access customer data on the increasing number of business applications that are accessible by the devices.

RIM is expected to hit 3 million subscribers by the end of this month from about 1 million 16 months ago, Gartner said. A major contributor has been RIM's success in Europe, which is expected to account for 20 percent of the company's sales by the end of the year. RIM had no presence in Europe a couple of years ago.

"RIM has been out there for a long time with a target on its back, and no one has been able to touch them," Kort said.

Close behind PalmOne in the first quarter was Hewlett-Packard Co., which was No. 3 in the market with a 17.6 percent share. HP, based in Palo Alto, Calif., increased shipments by 4.4 percent to 601,352 from 575,853 a year ago.

Nokia Corp. was No. 4 with a 9.9 percent market share, followed by Dell Inc., Round Rock, Texas, with 6.3 percent. Dell's shipments grew by 32.9 percent to 217,000, while Finland-based Nokia went from no PDA shipments a year ago to 340,000.

Nokia, which is expected to ship 220 million devices this year, is able to move into the market quickly because of its size, Kort said. Its PDAs, which the company markets as smart phones, are less for the enterprise and more for consumers or professionals looking to access email over the Internet.

In PDA operating systems, Redmond, Wash.-based, Microsoft Corp. led the market with Windows CE, which increased its market share to 46 percent from 40.2 percent, Gartner said. Shipments increased 43 percent in the first quarter to 1.6 million from 1.1 million a year ago.

Shipments of RIM's OS, which only runs in the Blackberry, increased the same as those of the device to take the No. 2 spot from the Palm OS from PalmSource Inc., based in Sunnyvale, Calif. Shipments of the latter fell 38.8 percent to 684,750 from 1.1 million. RIM had a 20.8 percent market share, and the Palm OS 20 percent.

In the enterprise market, Microsoft is expected to close the gap with RIM after the release of the upgrade to its mobile operating system, code-named Magneto, which will push email to PDAs through Exchange Server 2003, Kort said.

To overtake RIM, however, Microsoft will need to convince many enterprises to deploy Exchange Server 2003, and hardware manufacturers, particularly HP and Dell, will have to start selling devices that have features capable of luring Blackberry customers.

"These are not trivial matters," Kort said. "It'll take a year before Microsoft can put some real heat on RIM."

Rounding out the top five operating systems were Symbian, which had a 9.9 percent market share in the first quarter; and Linux, 0.8 percent. Linux saw a 21.6 percent drop in shipments, which led to a half-point drop in market share.