Report: Microsoft catches up to Palm in PDA OS market

Windows CE comes on strong

Most PDA (personal digital assistant) users were introduced to the device through the Palm OS, but Microsoft Corp.'s Windows CE .Net operating system family has pulled into a virtual tie with the pioneering PDA OS (operating system), according to first-quarter market share information from Gartner Inc.

PDA vendors shipped 1.11 million units with the Palm OS in the first quarter, down 21 percent from the first quarter of 2003, said Todd Kort, principal analyst with Gartner. Shipments of Windows devices increased 4.6 percent from last year's first quarter to 1.10 million units.

The first quarter results were exacerbated by anticipation for PalmOne Inc.'s new Zire devices, causing many would-be purchasers to wait until the new PDAs were introduced this week, Kort said. But the growth of Windows-based PDAs reflects the ascent of the corporate PDA market and the decline of the consumer PDA market, he said.

"Microsoft just has a stronger story," Kort said. Just about every enterprise has developers who have created applications for the desktop Windows operating system, and the programming tools for the Pocket PC version of Windows CE are very similar to the desktop programming tools, he said.

Microsoft also bundles Outlook, its e-mail software, with every version of Pocket PC, Kort said. Outlook is used by a wide number of corporations as e-mail client software.

PalmOne and PalmSource Inc. have done a decent job of connecting into the enterprise world, but Microsoft along with Pocket PC vendors Hewlett-Packard Co. and Dell Inc. simply have too much market power among business customers, Kort said.

The Palm OS has also been hurt by the reluctance of casual PDA users to upgrade to some of the newer PalmOne devices, Kort said. New cell phones are coming out on the market with personal information management (PIM) features that rival low-end PDAs, and many consumers who need a PDA solely for the PIM features would rather upgrade to a relatively inexpensive device with voice capability, he said.

Gartner said the overall PDA market fell 4.6 percent compared to last year's first quarter, reflecting a smaller decline than announced by market researcher IDC earlier this week. Gartner includes the BlackBerry device made by Research in Motion Ltd. (RIM) in its results, and IDC does not.

BlackBerry shipments have increased dramatically over the last year, Kort said. The BlackBerry allows users to access and reply to their corporate e-mail through wireless cellular networks.

RIM enjoyed a 353 percent increase in BlackBerry shipments over the last year, from 89,500 units in the first quarter of 2003 to 405,000 units in the first quarter of this year, Kort said.

Wireless e-mail devices such as the BlackBerry will help spur growth in the second half of the year, Kort said. Cell-phone companies such as Nokia Corp. and Motorola Inc. as well as PalmSource have all licensed RIM's e-mail software for their cell phones. PalmOne is also working with RIM rival Good Technology Inc. to bring wireless e-mail capability to the popular Treo 600 smart phone.

New phones are expected later this year from all those companies, Kort said.

Western Europe was the strongest growing region around the world, according to both Gartner and IDC. Shipments increased 24 percent in the first quarter, compared to a decrease of 13 percent in U.S. PDA shipments, Gartner said.

Copyright © 2004 IDG Communications, Inc.

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