European Converged Device Market Shows Poor Opening Quarter

According to the latest market data from IDC, the Western European mobile device market (including standalone handhelds and converged devices) grew by 25% year on year in the opening quarter of 2006, as total shipments reached 3.2 million units. Significantly, the handheld market failed to recover from the dramatic decline in 4Q05, as shipments of just 549,000 units represented further negative growth of -21% year on year, with only Fujitsu Siemens registering positive growth. Additionally, disappointing growth of 43% and shipments of 2.67 million units for converged devices meant market performance fell below expectations.

"As anticipated, continued migration towards converged devices combined with a decline in dedicated GPS unit ASPs caused a second consecutive quarter of negative growth for handhelds," said Geoff Blaber, senior research analyst, European Mobile Devices. "Given the dramatic ASP declines in 2005, shrinking margins mean few vendors can resort to further price cuts as a mechanism to invigorate growth, leading IDC to believe that vendor market withdrawals are likely in 2006."

With the converged device market continuing to rely largely on S60 shipments in consumer segments to drive growth (Symbian OS accounting for 72% of shipments) in 1Q06, growth was disappointing at 43% year on year as portfolio transitions for vendors such as Sony Ericsson and Motorola, combined with a lack of new product introductions, curbed first quarter growth. Furthermore, while Windows Mobile enjoyed market growth of 77%, growth remains inhibited by a lack of support from OEMs with the capability to complement the volumes supplied by Taiwanese vendor HTC.

"Despite a disappointing opening quarter for the converged device market in 2006, IDC predicts strong growth in subsequent quarters as the consumer market responds to the introduction of compelling solutions running Symbian OS, including multiple Nokia N range offerings and the Sony Ericsson W950. With a dramatic expansion of enterprise-class devices from Nokia, Sony Ericsson, RIM, and Windows Mobile vendors in 2Q and 3Q and the abundance of highly segmented mobile email solutions, IDC believes the Western European converged device market can still exceed 20 million units in 2006," said Jean-Philippe Bouchard, senior research analyst, European Mobile Devices.

Vendor Highlights

Nokia - The Finnish vendor continued to drive the bulk of converged device shipments as continued demand for its S60 consumer-orientated devices and the N70 in particular fueled growth of 64% year on year with shipments of 1.88 million units. IDC expects the Finnish vendor to enjoy progressively stronger growth year on year throughout 2006 in the wake of the launch of the enterprise class E series and further consumer-focused S60 launches.

RIM - Although the competitive climate threatens to intensify for the Canadian vendor, particularly in the SMB space, shipments of 225,595 units constituted another record quarter despite the settlement with NTP coming late in the quarter. Delays and complications in Microsoft's rollout of the messaging and security feature pack (MSFP) continued to work in RIM's favor and reiterates the challenge its competitors face in rivaling RIM's comprehensive carrier channel coverage.

HP - The U.S. vendor suffered further negative growth in the opening quarter as handheld demand continued to decline in response to a sharp slowdown in demand for GPS solutions, with shipments falling by 27% year on year. With converged device shipments exhibiting growth of 35% year on year, voice enabled devices' share of the portfolio increased to 25% in 2006, with further advances anticipated in 2006 following the launch of the hw6900 series.

Palm - Like HP, Palm continued to suffer negative growth as shipments declined by 25% from 1Q05, causing a slip in share of the total mobile device market to 4%. While the addition of O2 as carrier partner will undoubtedly increase market penetration, flat Treo shipment growth year on year and negative handheld growth of -29% illustrate the importance in expediently launching a European flavor of the Windows Mobile Treo 700w.

Acer - Acer's price-aggressive approach to the market remained a leading contributor to handheld market share declines for HP and Palm despite shipments of 95,590 representing negative growth of -12% from the corresponding quarter of 2005. With an overwhelming positioning towards GPS characterizing the portfolio and tight profit margins given the top-heavy specification/price-point balance, Acer faces a substantial challenge in responding to the market conditions that look set to characterize 2006.

Segmentation

Handhelds

These devices bring a wide range of mobile functionality to their users. Either pen- or keypad-centric, they are designed to access and manage data. They may include wireless capabilities to enable Internet access and text communication, but not telephony. This category includes pen-based and keypad-based handhelds. Handheld devices with telephony capabilities are tracked within the converged handheld device category.

Converged Devices

These mobile devices are either voice- or data-centric and are capable of synchronizing personal information and/or email with server, desktop, or laptop computers. Positioned to solve the "multiple device question," and replacing the need to carry a mobile phone and a pen-based handheld or a mobile phone and a pager, for example, these devices may also include an expanding list of features, such as multimedia or email. Such devices match wireless telephony capability to evolved operating systems or application environments, such as the Palm OS, Windows Mobile 5.0, and the Symbian platform and include the ability to download data to local storage, run applications, and store user data beyond their required PIM capabilities."

Posted to the site on 3rd May 2006