Report: Palm Still Dominates Despite PressuresReport: Palm Still Dominates Despite Pressures

The handheld device market continued its relentless downsizing in 2005, IDC reported Thursday, while one major investor in market leader Palm Inc. urged the company to consider putting itself on the block.

The market research firm said that shipments decreased 18.2 percent from the like quarter in the previous year, while shipments for the full year dropped 16.7 percent to 7.5 million units.

"The handheld market has been in decline since 2001," said research analyst David Linsalata in an interview. "The biggest problem is that there hasn't been a killer application."

Even so, Linsalata said Palm still has strength in the enterprise market and he said many users who have become accustomed to the older Palm Tungsten devices switch over to Palm Treos. Another plus is the recently-introduced Treo smart phone with Microsoft software, he observed.

Palm investor Mark Nelson, who is reported to own more than 6 percent of the firm's stock, has joined hedge fund Sagio Investments in suggesting the company could be sold. According to the Wall Street Journal, Nelson complained about "slowing innovation, commoditization, and choked margins" at Palm.

The IDC report indicates that handheld device makers are caught up in a declining market. Palm maintained its top spot in the IDC rankings with 45.6 percent market share for the year, followed by Hewlett-Packard's 20.8 percent. Dell was in the third position with 8 percent market share.

IDC said handheld devices were up 37.6 percent in the fourth quarter over the previous quarter, primarily due to robust holiday sales.

The market research firm said device manufacturers remain committed to their market. "New devices continue to come out from the market leaders, aimed at different user types and offered at different price points," said Ramon Llamas, an IDC Mobile Markets Group research analyst, in a statement. "With the addition of GPS solutions, multimedia capability, and Wi-Fi connectivity, handhelds offer additional value beyond just PIM for the users."

Linsalata noted that handheld devices with PIM applications are beginning to experience some pressure from smart phones with rudimentary PIM features. He added that handheld makers including Palm operate more in the enterprise market than in the consumer market where smart phone manufacturers like Nokia dominate.