Handheld Devices Selling Smartly

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December 27, 2000 (12:35 PM EST)

By Janet Haney,

With both PC and semiconductor companies warning that their sales and profits will be lower than expected, where does that leave the wireless appliance market?

"From a general perspective, this holiday season has been a strong one for smart handheld devices," said Alex Slawsby, analyst for handheld devices at research firm IDC. "Cell phones continue to sell strong."

Compaq Computer, for one, is sold out of its popular IPaq handheld product.

Although Compaq, Houston, Tex. said in December that it would miss its fourth-quarter sales and profits projections, it also revealed that it's making about 100,000 units of its hot handheld devices a month.

Referrring to the IPaq and other handheld systems, Slawsby said demand is definitely outstripping supply.

"This year we saw an expansion of the smart handheld device market, specifically in the personal companion area, the pocket PCs, the Palm, things like that," the IDC analyst said. "The competition has driven up the features and certainly the interest."

A recent retail stores survey conducted by Bear Stearns confirmed that the Palm devices are in high demand this holiday season. The investment firm found that 94 percent of the retailers it surveyed said demand for Palm devices was in line or better than expected.

Palm, in its recent earnings report, said it commands 70 percent of the market and has shipped more than 2.1 million devices this quarter, up 45 percent from the prior quarter.

"It is pretty clear, according to the retailers we spoke with, that Palm devices are near the top of a lot of wish lists this holiday season," Bear Stearns analyst Andy Neff wrote in a recent statement.

Bear Stearns also discovered that Handspring devices were selling better than anticipated.

Raymond Godbeer, store manager at Best Buy, Marin City, Calif., said PDAs and other products are selling well, and digital cameras also have been in high demand for the Christmas season.

Despite that news, Best Buy said in its recent third-quarter earnings release that a slowdown in consumer spending hurt profits during the quarter.

One product that nobody can seem to get enough of is the wired Sony PlayStation 2.

"We're taking regular shipments and we put them on the dolly to come out on the floor and they're gone before they get to the spot they're supposed to get to," said Donna Beadle, spokeswoman for Best Buy.