Will Dell Succeed in the Pocket PC Market?

Most pundits predict enormous growth in handheld computing over the next decade. After all, a handheld device is cheaper, handier, and almost as capable as a PC. Strategy Analytics estimates that the global handheld market will grow from 4 billion dollars today to 17 billion in 2007. Dell and other manufacturers sense a huge market opportunity.

For the past six years Dell has watched on the sidelines as HP, Casio, and Compaq partnered with Microsoft and introduced many generations of handheld devices. During that time, technology advanced, built-in software improved, and the cost of parts decreased. In those six years, thousands of software and accessory products have been developed to support the Microsoft Pocket PC platform. Dell saw that the time was right and introduced two new low-cost Pocket PCs.

Naturally, Dell would like to help grow the market and become a dominant Pocket PC manufacturer, as it has with the PC. Dell's strategy is simple and plays to its strengths: keep costs down, offer a strong unit at a great price, sell its devices using Dell's direct sale marketing machine. Pocket PC market leader HP has a higher internal cost structure than Dell, and Dell senses vulnerability.

As you can see from Rich Hall's review on page 12, the Dell $200 and $300 Pocket PCs are strong offerings. I recently heard a Gartner prognosticator predict that Dell could soon gain 30% of the market. Despite all these positives for Dell, I'm skeptical.

3 reasons why it may take time for Dell to be successful in the Pocket PC space

1. The Pocket PC is not yet a Commodity.

   
   For Dell's efforts to be profitable, it needs to sell a lot of units at the eventual targeted $250 and $350 prices. The Pocket PC has not yet reached "commodity" status as have desktops, notebooks, and printers. A printer purchase is obvious; a Pocket PC purchase is not. Individuals and businesses en masse are not yet convinced of the necessity of adopting the Pocket PC. More enterprise and individual success stories must be documented. Individual and business buyers must believe that they will be at a true competitive disadvantage without a Pocket PC.

   Further, for many professionals and businesses, the more basic capabilities of the low-end Palm OS devices at $100-$200 are sufficient, especially given Palm's simplicity. Currently, Pocket PCs are best suited to individuals who enjoy using computers, and for visionary businesses willing to make the initial investment.




2. There is a significant learning curve to become an effective handheld vendor.

   
   A surprising number of resources are required to do the job right. Engineering, manufacturing, quality control, marketing, and supporting handheld computers are more complex and less of a science then they are for desktop PCs. What follows are just a few of the challenges for handheld manufacturers, and the compromises being made to control costs.