Handheld computers take focus from PCs

[Jason Dunn]

<a href="http://www.usatoday.com/life/cyber/tech/review/2002/2/18/handhelds.htm">http://www.usatoday.com/life/cyber/tech/review/2002/2/18/handhelds.htm</a><br /><br />So PDAs are a growth industry eh? Good to know - I might stick around after all then. ;-)<br /><br />"As PCs sales flounder, tech companies are investing in products geared to the fast-growing handheld market. Sales of handheld computers, such as personal digital assistants and portable email devices, are expected to grow 44% from 2002 to 2004, says Gartner Dataquest. PC sales are expected to increase 21% during the same period. At that rate, it will take until 2004 for the PC market to return to its size at the height of the tech boom." <br /><br />I found this quote to be quite shocking:<br /><br />"But handhelds are lucrative, says Gartner analyst Todd Kort. Some handhelds can sell for a 50% profit margin or more, Kort says, while PCs are often sold at a loss."<br /><br />50% profit margin? Holy gross margin Batman! Source: Robert Bogue

[James]

I found this quote to be quite shocking:

"But handhelds are lucrative, says Gartner analyst Todd Kort. Some handhelds can sell for a 50% profit margin or more, Kort says, while PCs are often sold at a loss."

50% profit margin? Holy gross margin Batman! Source: Robert Bogue


I've long suspected that. It's not like they had to invent much technology to build these, it was mostly all integration and when you choose the right parts, that's dirt cheap.

[JohnnyFlash]

50% profit margin? Holy gross margin Batman! Source: Robert Bogue


no wonder Compaq was lately showing sound financial results while around stormy waters destroyed profits of others

the war is just beginning: mobile phone vendors will join current PDA manufacturers, and then, Jason, I can tell you only one thing:

YOU AIN'T SEEN NOTHING YET

says who? says jpzr from http://WirelessSoftware.info

[innersky]

Bottom line: Pocket PC manufacturers are ripping us...

[OzBert]

Get real people.

The 50% profit margin can only be achieved under optimal circumstances. E.g. big Asian (usually OEM) manufacturer selling directly.

Go thru retail, and buy as reseller (e.g. Casio) from an OEM, there is *no way* you can have a 50% profit margin...

Oz

[Jason Dunn]

Bottom line: Pocket PC manufacturers are ripping us...


Nah, I don't think this is all of them. I'd be surprised if Compaq was hitting 20% profit margin.

People like us adopting cutting-edge technologies pay the way for others to follow us years later. It's the way the technology industry works... :-)

[JonnoB]

As this industry grows and there is more parity, we will see price erosion, just like in other industries. We are probably 12-18 months away from standard PocketPCs being sold for $200-250.

[innersky]

Bottom line: Pocket PC manufacturers are ripping us...


Nah, I don't think this is all of them. I'd be surprised if Compaq was hitting 20% profit margin.

People like us adopting cutting-edge technologies pay the way for others to follow us years later. It's the way the technology industry works... :-)


It's a dirty job, but somebody has to do it :wink:

[Timothy Rapson]

The big study that caused such an uproar last month about Palm loosing out to PPC by 2005 stated that PPC prices by the end of 2002 would range from $100-$700 (I am guessing that low figure was for some prototype mono unit like the HP Linux model that never made it to market.)

Only 14 months ago Palm was reporting 40% margins on their hardware sales. That is, they were paying the Southeastern Asian company that was making the Vxs $180, wholesale them to Best Buy for $300 and Best Buy was selling them for like $350. The profits on these things must be incredible and offer a LOT of room for movement.

Best Buy was selling Ipaq 3765s for $350 after rebate, last December. The Palm M100 that sells for $85-100 here sells for $40 in Japan. And if Palm is losing money they are not losing much. Most of their losses are coming from too many high-paid execs, projected building, and wasting money buying other companies when they could have been building PDAs.

When all the companies that were finaly convinced by PPC 2000-2002 to make the hardware all get fully online with manufacturing a standard model with dual slots, and all the other basics, we will see prices come down to the $370 that Gartner predicts the average PPC model to sell for by the end of this year. I say about time.

As this industry grows and there is more parity, we will see price erosion, just like in other industries. We are probably 12-18 months away from standard PocketPCs being sold for $200-250.

[popko]

that way i see it:

if there is a 50% margin ... it may be good news for us ... the idea is that there is still lots of room for price drops as the war on pdas get more intance. so by year end or maybe early next year, the average price for pdas will be a lot cheapter than they are today.

[Daniel]

50% profit margin? Holy gross margin Batman!

ha ha ha :lol:
That was funny. :)

This doesn't really surprise me though. Hopefully as popko said, it means price drops through competition which is a very good thing for us. :)
Let's be honest, we bought our PPCs (and Palms) at the price they were because it was worth it, we could justify the cost to ourselves, I don't really have a problem with the profit margin as long as it means that there is substantial (re-)investment in the respective PDA platforms.

daniel

[vetteguy]

Is there any way this can be true? Look at products like the XBOX. Here Microsoft is taking existing technology and hardware, bundling it together, and selling it at a $100 loss per unit. Now here's Compaq launching a new iPAQ. Unless it's totally based on the hardware from their first unit, there are R&D costs, materials, feasibility studies, etc. Even producing them in the cheapest location possible, using the most readily available parts, I can't believe that it would only cost them $300 to make. Maybe I'm just that naive. If so, then I obviously need to go design an new PDA!

[Daniel]

Is there any way this can be true? Look at products like the XBOX. Here Microsoft is taking existing technology and hardware, bundling it together, and selling it at a $100 loss per unit. Now here's Compaq launching a new iPAQ. Unless it's totally based on the hardware from their first unit, there are R&D costs, materials, feasibility studies, etc. Even producing them in the cheapest location possible, using the most readily available parts, I can't believe that it would only cost them $300 to make.

I don't think that anyone would argue that the H38xx series were markedly different from the H36xx. The H37xx is pretty much the same except for the extra ROM.
I would imagine that these extra costs that you point out are acually accounted for over the life (or projected life) of the product in question. So the parts and assembly of each unit is quite low and the R&D costs are also low based on the assumption that they are accounted for over a large number of units and an extended period of time. Given the similarities between a lot of the "new" 2k2 models there would be some initial costs that would have been covered already.
I think the only company that made a very different 2k2 model was Casio. Then HP and so on.
I don't think that every company would necessarily make 50% profit either.

daniel

[Ekkie Tepsupornchai]

Is there any way this can be true? Look at products like the XBOX. Here Microsoft is taking existing technology and hardware, bundling it together, and selling it at a $100 loss per unit. Now here's Compaq launching a new iPAQ. Unless it's totally based on the hardware from their first unit, there are R&D costs, materials, feasibility studies, etc. Even producing them in the cheapest location possible, using the most readily available parts, I can't believe that it would only cost them $300 to make. Maybe I'm just that naive. If so, then I obviously need to go design an new PDA!


The video game market is VERY different from the PDA market. In the case of XBOX (or Playstation or Gamecube, etc), they do mark down the price of the unit and take a hit, but realize that they make money on every game sold for that platform. Thus, the idea is to take the initial hit and then make money on all the games you'll invariably buy afterwards. PPCs are different because in most cases none of the makers are making money for the software you buy for it, so it's in their best interest to make money on the actual unit.

The same money making structure applies to a number of other items such as shavers (money made from the disposable blades), electric toothbrushes (brush heads), ZIP drives (removable media), etc.

Ekkie

[vetteguy]

I agree with all of you, but the point about the life of the product makes me wonder what the manufacturers think the life of a PPC2002 device is. If some of them are already plannig XSCALE devices for this summer, it would seem that they plan on a relatively short lifetime. I know that they still sell and market -1 generation devices, but for how long? I'm not disagreeing with anyone, I'm just very curious about this and would like to know more. (Not to mention the fact that accounting was my worst subject so I'm certainly no expert!)

[Daniel]

I agree with all of you, but the point about the life of the product makes me wonder what the manufacturers think the life of a PPC2002 device is. If some of them are already plannig XSCALE devices for this summer, it would seem that they plan on a relatively short lifetime. I know that they still sell and market -1 generation devices, but for how long? I'm not disagreeing with anyone, I'm just very curious about this and would like to know more.

There are a lot of aspects to product lifetime. I guess the fundamental issue is that bringing out a completely new device is a fair bit more expensive than updating the hardware platform. The H36xx to H38xx series have been around for about two years (?).
The upside to the XScale is that it has the same instruction set as the StrongARM, so there may be more cost in re-designing the hardware platform (probably the biggest issue is the layout of the actual PCB as I would guess most of the components will be the same) but otherwise the software is the same.

(Not to mention the fact that accounting was my worst subject so I'm certainly no expert!)

Tell me about it, I've been out of school for 10 years and I'm still doing (and failing; motivation issues) accounting! :)

daniel