PDA sales growth tapers off

October 11, 2001: 2:11 p.m. ET

At 11.9 percent, August U.S. retail sales growth is the slowest of the year.

NEW YORK (CNNmoney) - Growth in U.S. retail sales of handheld computers in August fell to its lowest level of the year, despite a sharp decline in the average price of such devices, a new market research report shows.

Sales of handheld computers, sometimes referred to as portable digital assistants, or PDAs, at U.S. retailers grew by just 11.9 percent in August 2001, according to a report released Thursday by NPD Intellect. That compares with a 207.5 percent rise in unit sales in August 2000.

At the same time, the average price consumers paid for a PDA fell to $248 from $283 in the prior year, the report says.

"Despite the modest unit increase, August was not a blockbuster month for handhelds," said Stephen Baker, NPD Intellect's senior hardware analyst.

He said the unit growth, which was the weakest for any month so far this year, appeared to have been driven by substantial price cuts, especially by Compaq and Handspring, and not by the typical seasonal factors that drive sales.

Demand for products such as PDAs and other electronics tends to increase in the second half of the year because of the back-to-school and holiday selling seasons.

Palm (PALM: up $0.36 to $1.87, Research, Estimates), the dominant supplier of PDAs, continue to garner a majority of the market share, albeit by a small margin. The company led the market with 51.2 percent market share, its lowest of the year and down 16.7 percent from August 2000, NPD Intellect said.

At the same time, Handspring (HAND: up $0.19 to $1.43, Research, Estimates), which sells devices based on the same operating system as Palm's, took 19.5 percent of the market, up 14.9 percent from a year ago, by NPD Intellect's count.

Sony, which only recently began selling its handheld devices, took 10.4 percent of the market. Compaq (CPQ: up $0.27 to $9.77, Research, Estimates), whose popular iPAQ devices run Microsoft's Pocket PC operating system, controlled 8.3 percent of the market share, up 8.3 percent from August 2000, NPD Intellect said.

The firm attributed Handspring and Compaq's gains in large part to their aggressive pricing tactics.

The average selling price, or ASP, of a Handspring device in August fell 15.7 percent from a year ago to $194. At the same time, the ASP for a Compaq iPAQ fell 15.7 percent to $418.

Although it ranked fifth in terms of market share, garnering 4.3 percent, the ASP for a handheld computer from Casio in August plunged to $132, down 45.5 percent from a year ago.