Microsoft takes largest share of PDA market for first time

By Matt Whipp

Posted on 15 Nov 2004 at 13:45

Microsoft's PDA platform has overtaken the once dominant PalmSource, according to research group Gartner.

The company says that in the most recent third quarter, the global market for handheld devices showed Microsoft's Windows Mobile Pocket PC platform accounting for nearly half the three million units shipped.

About 2.8 million handhelds were shipped in Q3, with Microsoft taking 48.5 per cent of that market and PalmSource accounting for 29.8 per cent, down from 46.9 per cent a year earlier and a drop of 28 per cent.

Microsoft's market share grew some 32.6 per cent, while other benefactors for the period were Research In Motion (RIM) and its Blackberry email-ready handhelds. RIM's share grew from just under four per cent to nearly 20 per cent: 356.6 per cent growth year on year.

There are well-documented reasons for PalmSource's slowdown. Sony - its biggest licensee outside PalmOne - withdrew from selling handhelds outside Japan.

Other Japanese handheld makers have also stopped international sales of models. Sharp is pulling its Linux-based Zaurus PDAs. Gartner's figures showed Linux's market share dropping by half year on year to less than one per cent.

Pocket PC handheld maker Toshiba has done so too, but this has not had the same effect as Sony, as Toshiba are one of many.

'The robust Microsoft Windows CE market has been driven in part by the wide choice of vendors,' said Todd Kort, principal analyst in Gartner's Computing Platforms Worldwide group. 'Business customers tend to steer clear of markets dominated by a single supplier, which is where the Palm OS market stands today.'

Indeed there has even been speculation that the market may be tipped further against PalmSource. Associated Press reported an analyst saying that palmOne was considering using Microsoft's platform for its Treo smartphone devices.

With upcoming versions of PalmSource's operating system focussing on the phone features to play on the success of palmOne's Treo, PalmSource will want to keep its relationship with its hardware partner exclusive.

'A decline in Palm OS shipments was expected in the third quarter of 2004, but not of this magnitude,' Kort said. 'The company is pouring the vast majority of its resources into its smartphone business. A reduction in the number of PDA models palmOne offers is expected in 2005.'

The PDA market has been relatively stagnant for a while. Gartner's overall annual growth rate of 13 per cent is a marked difference to IDC's figures for the same quarter that suggested an 8.7 per cent drop. Canalys put the fall at four per cent.

The nascent smartphone market is showing a much healthier growth rate and palmOne would be forgiven for favouring smartphones over PDAs. Canalys said the smartphone sector trebled in Q3, rising 190 per cent. But if palmOne is going to narrow its market, it would also be forgiven for wanting to offer customers choice, such as a choice of operating systems.