Vendor flight from handhelds seems likely

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Full-function smartphones are facing competition from cheaper phones offering attractive new features, according to analyst firm IDC. Research shows that sales of traditional handhelds or PDAs are declining so rapidly that some vendors are likely to withdraw from the market altogether.

Sales of so-called converged devices in Europe grew 10% during the second quarter of 2006, according to IDC’s figures. This is lower than was expected, in part due to delayed product launches but also because of strong competition from high-end feature phones, according to the firm.

Converged devices are generally high-end smartphones such as Symbian-based handsets, while feature phones are typically mid-range models using proprietary software.

“Feature phones are competing with converged devices on conspicuous features such as cameras and multimedia to the extent where buyers do not see a difference,” said Andy Brown, IDC’s program manager for European mobile computing and mobile devices.

Meanwhile, the outlook is “pretty terrible” for the traditional handheld as buyers move to converged devices, with handheld sales set to fall by 30% this year, Brown said. “We may see vendors withdraw or re-focus if the slide continues, as it will be difficult to stimulate sales through further price drops,” he added.

Nokia dominated sales in both mobile phones and converged devices, and accounted for 90% of Symbian devices shipped during the quarter, according to IDC.

Brown said that the market is in the midst of a transition phase. IDC published a graph predicting that the Symbian OS share of the market will fall over the next four years while Windows Mobile devices grow in popularity. However, Symbian OS is still likely to retain the lion’s share of the overall market.

Handsets using the HSDPA “Super 3G” standard to offer mobile broadband data rates are just starting to come to market now, but these are not yet a compelling proposition, according to IDC.”It [HSDPA] will not really start to happen until next year,” Brown said.

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