Sector Insight: Laptop PCs and PDAs - Personal Šeffects.

The combined market for laptop PCs and PDAs was worth £735m in 2004, up 137% from £311m in 1999, according to Mintel. In volume terms this equates to 1.4m units, a rise of more than 300% on the 338,000 units sold in 1999. Value growth is less pronounced due to widespread price reductions in the market.

Within this combined market, laptop PCs are bigger both in value (£580m in 2004) and volume (870,000 units). This market has been greatly boosted by the fact that there is now far less of a price differential between a laptop and the equivalent desktop PC.

Also, faster processors and feature improvements mean laptops can do most things a desktop can, but with added benefits such as wireless mobility.

The PDA market achieved sales of 530,000 units and reached just under £155m in value in 2004, and since the arrival of the products in the 90s, its growth has been impressive.

Conventional PDAs form the main part of this category, according to Mintel, but the market is moving forward thanks to the next generation of PDAs, which covers wireless handheld devices and PDA phones such as the BlackBerry.

Smartphones, which are voice-driven, rather than data-driven, can also be used as PDAs, but offer fewer functions.

There has been some consolidation in the laptop and PDA market in terms of manufacturers, most notably the merger of Hewlett-Packard (HP) and Compaq in 2002, and the withdrawal of Sony from the PDA market last year.

HP sells PCs and PDAs under both the HP and Compaq brands. In the laptop market it also uses the Pavilion and Presario brands, while iPAQ is its main PDA brand.

Functional fit

Neil Dagger, iPAQ and wireless device business manager at HP, says functionality, rather than technology, is driving the PC and PDA market. 'Many people use them to get better organised; as well as diary, contacts and calendar, they can use it to organise their social life, look at web pages or book a restaurant.' He adds that consumers are also buying the products for their jobs - the 'prosumer' market. 'This comprises professionals who make the purchase in retail and then often charge it back to the company', says Dagger.

Dell is a global player in this market and has established a strong business model under which it sells all products direct to minimise the costs of distribution through retailers or dealers; about 98% of its sales are made online.

The company's PDA products, which were launched in 2003, are marketed under the Axim brand. Its laptop PCs are branded Inspiron and Latitude, with the latter being lightweight notebooks. 'Lower prices and increased performance, especially for notebooks, improved battery life and the ability for these devices to link to other systems, such as mobiles and cameras, have been the key drivers of notebook and PDA growth,' says Bob Bennett, Latitude Notebook marketing manager, Dell UK.

'A significant benefit has been increased productivity gains - studies have shown that working in a mobile environment can boost productivity levels, and more workplaces are turning to flexible working arrangements, which would have been unachievable without these devices,' he adds.

Within the PDA market, two names stand out: palmOne and Research in Motion (RIM). PalmOne has done much to develop the category since it launched its Palm Pilot in 1992. Its current range consists of handheld PDAs and smartphones RIM's innovative BlackBerry is fast becoming a major player in the PDA market thanks to word of mouth, PR and experiential marketing. It is a low-key, simple device, which has attracted a core market of mobile professionals.

The company claims one of its major challenges with the BlackBerry was to decide'what to leave out' and that consequently the device is not overloaded with features that are rarely used.

However, Mintel believes competition from smartphones could be where growth in this market lies. This is partly because consumers find it more acceptable to carry around a mobile phone than a PDA and partly because phones are sold more aggressively in retail.

Growth through upgrades

HP's Dagger believes smartphones can grow the overall market for all PDAs. 'People who wouldn't buy a PDA might buy a smartphone instead. They see the functionality available and will do more with the phone. But with a smartphone you can only skim emails, its screen is far smaller and you can't necessarily open attachments, so hopefully, in time, they will upgrade to a PDA. The need usually arises between one and three months after a honeymoon period,' he says.

Overall, the forecast for this sector is very good and the combined market is expected to grow during the next five years by 127% to £1.6bn. Price will remain a crucial element of attracting customers to the market, although PDAs are predicted to remain more of a niche category.

LAPTOP PC MANUFACTURERS' UK MARKET SHARE BY NUMBER OF UNITS

2004 (est) 2002 02-04

(000) % (000) % % change

1 Hewlett-Packard 139.2 16 65.6 16 112.2

2 Toshiba 130.5 15 49.2 12 165.2

3 Packard Bell/NEC 121.8 14 61.5 15 98.0

4 Dell 121.8 14 49.2 12 147.6

5 Acer 95.7 11 36.9 9 159.4

6 Sony 69.6 8 41.0 10 69.8

7 Time 52.2 6 32.8 8 59.1

8 Others 139.2 16 73.8 18 88.6

Total 870.0 100 410.0 100 112.2

Source: Mintel

PDA MANUFACTURERS' UK MARKET SHARE BY NUMBER OF UNITS

2004 (est) 2002 02-04

(000) % (000) % % change

1 Hewlett-Packard 180 34 46 10 291.3

2 palmOne 170 32 205 45 -17.1

3 Dell 30 6 n/a n/a n/a

4 Toshiba 30 6 18 4 66.7

5 Research in Motion 25 5 n/a n/a n/a

6 Sony n/a* n/a 32 7 n/a

7 Handspring n/a n/a 23 5 n/a

8 Compaq n/a n/a 18 4 n/a

9 Others** 95 18 113 25 -15.9

Total 530 100 455 100 16.5

Source: Mintel *withdrew from UK market during 2004 **includes own-label

PDA OPERATING SYSTEMS BY NUMBER OF UNITS

Units %

1 Windows Mobile/Microsoft Pocket PC 238,500 45

2 PalmSource 186,000 35

3 Others (BlackBerry, Linux, Symbian etc) 106,000 20

Total 530,000 100

Source: Mintel

ANALYST COMMENT

Thomas Husson European mobile analyst, Jupiter Research

The needs that drive the purchases of PDAs and laptop PCs are quite different, leading to two equally different markets.

Firms that have tried to position PDAs as a laptop alternative have had little success; those that have pushed the benefits of digital organisation, ease of use and, more recently, communication and multimedia have fared better.

By contrast, laptops deliver a full PC and internet experience. The number of UK consumers intending to buy a laptop in the next year is almost the same as those intending to buy a desktop PC. This rise in adoption has been boosted by price reductions and rising capability.

The dynamic area for PDAs is as part of the mobile market. Modern handsets all offer basic contacts and diary functions - the core abilities that drove the PDA market in the 90s. But mobiles will continue to evolve gradually, rather than moving directly to become highly functional PDA-like phones.

When choosing a mobile, 17% of Europeans consider PDA functionality as important. The original PDA market leaders appreciate this synergy between communication, contacts and diary. Psion was first with its Symbian off-shoot, followed by Microsoft with Windows Mobile, and Palm with its Treo range.

Until recently these smart mobile phones were aimed at business users, but now there is a shift to high-end consumers with the BlackBerry 7290 and the Nokia 7710.

Smarter mobiles are backed heavily by the operators. Devices being developed include Orange's SPV and O2's XDA range. The focus is on an interface and functionality to drive use and revenues. With this impetus, the pressure will remain on the standalone PDA market.