TMO Reports - Sony to Halt Handheld Sales in US & Europe; Future Focus on Wireless?

by , 5:15 PM EDT, June 1st, 2004

Sony said Tuesday that it will stop selling its Clie handheld personal digital assistants (PDA) in the United States and Europe later this year, at least for the time being. The consumer electronics giant said it plans to continue to develop and sell Clie PDAs in Japan and will reassess its handheld strategy for the United States and Europe.

"Presently, Sony is reassessing the direction of the conventional PDA, and Sony will not introduce any new handled Clie models in the United States or Europe this fall," Sony said in a prepared statement given to The Mac Observer. "Product development and sales continue for the Japanese market only. Sony is taking this time to examine the conventional PDA business and how it will transition into the future."

US versions of its Clie PDAs will continue to be manufactured for an unknown period of time, Sony said, but stocks will not be replenished once they run out. Sony will continue to offer tech support and honor Clie warranties.

The announcement comes as no surprise to Michael Gartenberg, PDA analyst for Jupiter Research, given recent numbers from the NPD Group, who reported Sony's market share had fallen to 10.4% in the first quarter of this year, compared to 16.2% in the same period a year ago.

"I think what is clear is that their strategy wasn't working," Mr. Gartenberg told TMO. "Sony's market share has been in somewhat of a decline for a little while now and Sony has brought many innovations for the PDA space, but some of their more recent models may have been too innovative, almost, to the marketplace in terms of what they were attempting to deliver at the high end of the line. At the low end of the line, a lot of their differentiation had gone by the wayside with introductions of models like the Zire 71 from PalmOne."

"I'm somewhat surprised, but would have been more surprised had Sony not had its Ericsson wireless phone division to fall back on," said Ross Rubin, a PDA analyst with NPD. "Sony has had a separate group working on cellular phones, and moving forward it appears it is becoming harder and harder for those two divisions not to compete."

Mr. Gartenberg believes another problem for Sony has been innovation at the expense of usability. "They had very, very high end models that tried to do a lot of things, but in many ways they compromised. Other issues revolved around the churn of their devices. Sony at one point was introducing more new PDA models than any other vendor. Eight to 12 models in the course of a calendar year is quite a bit of technology for both the market to absorb as well as customers to try and fathom in terms of differentiation."

What will Sony do now?

Mr. Gartenberg believes Sony will come back to the US market in a little over an year with fewer models and possibly more of a focus on wireless PDAs.

"I don't know if they'll come back with cheaper models, but probably will aim somewhat better in terms of the marketplace of what they are trying to deliver," Mr. Gartenberg commented. "Examples would be focusing on more compact design and coming out with wireless smart phones from the Sony Ericsson division to compete with the Trio. It also might mean focusing on only wired devices and not wireless devices."

"I believe perhaps that one of the reasons that they exited the shrinking, standalone PDA market was to focus their efforts more on their smart phone business," said Mr. Rubin. "I think it's apparent that the appeal of what was once the standalone PDAs is now tied to them becoming wireless. I think it's clear now that it makes more sense to produce an integrated device.

"Our data shows that the handheld market is shrinking. Wireless devices are still growing and their is a huge opportunity for growth in other parts of the world, and Sony is a global company. They're investing in the technology that has more promise for more customers in the future. Yes, it is more competitive, but there is still a lot of opportunity."

Mr. Rubin believes Sony must first decide if they continue working with their current smart phone partner, Symbian, or if they start producing wireless phone models with the Palm operating system. "They need to make a decision on what their strategic platform is going to be moving forward."

Mr. Rubin also thinks Sony has great opportunity in making a cell phone that has more multimedia capabilities users now find in their current PDAs. "If they were to bring some of that expertise from the Clie group to Sony Ericsson, I think it would improve that product."

Was Jobs right?

Mr. Rubin thinks Tuesday's announcement by Sony proves that maybe Apple's decision years ago not to re-enter the PDA market was a right one, at least for Apple.

"I think getting into the handheld market is a decision that's different for every company," Mr. Rubin commented. "One of the tricky parts of the cellular phone business is that much of your distribution comes through carriers. (Apple CEO) Steve Jobs has shown that he finds benefit in Apple owning as much of the channel and as much of the user experience as possible. It's should be apparent to anyone that handheld and wireless products, including cellular phones, don't work like that. Together with limited and shrinking market share, these are all signs that maybe Apple made the right choice."

Sony