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Thoughts on PDA Pricing

Today, Brighthand's Ed Hardy posted an interesting article called How Low Can They Go?. Ed discusses the recent price wars in PDA-land, and suggests that Dell was the instigator of this with the $200 Axim X5:

"The Axim X5 Basic offered what had previously been considered high-end features but for an entry-level price, only $200 after a rebate. This put tremendous price pressure on the competition and we're still feeling the effects. I sincerely believe that if the X5 series had not been released, every handheld currently available would cost $100 more than it does now."

I think Ed is correct in his argument here -- Dell has pushed the prices downward, particularly on the Pocket PC side, where they had traditionally been $100 or more than Palm OS devices. This has been good for the customer, and of course, rough on PDA makers. However, with PDAs becoming more commonplace, getting higher quality parts to make them have lowered in price too. Basically the PDA industry is slowly moving in the direction of the PC industry, where beige boxes are a commodity.

I do think Palm-Powered devices have a slight advantage over Pocket PCs though, because Palm OS devices vary in specs, sizes and features from each other. Just compare the differences between devices available (and soon to be available) from Palm OS licensees: Tapwave Zodiac, Sony UX50, AlphaSmart Dana, Palm Zire 71, Palm Tungsten C, Handspring Treo 600 and the Samsung i-500.

Meanwhile, core Pocket PC device specs are identical by definition, with a device here or there with a slightly different sized or colored case and maybe a different feature or two added for high-end users (like WiFi or Bluetooth). But when you boil down the Pocket PC world, these devices are clones of each other, more or less.

This means Pocket PCs will probably become commodities more easily than Palm OS devices because Palm OS devices offer greater variation.

Another pricing issue to consider is the "early adopter factor" which PDA makers use to their advantage. New devices are released with the idea that early adopters will pay any price for the latest and greatest, immediately. PDA makers get fatter margins from these buyers before dropping prices (often several times) to gain sales from buyers who aren't willing to buy immediately, or pay top dollar.

I suppose if pricing keeps being driven down by Dell, these initial "early adopter" prices might have to be lessened... however, a firm like Sony can release a device like the UX50 or NZ90 for an outrageous price of $800 because they're big enough to absorb low sales to get early adopters. Just compare the UX50 or NZ90 to the very low cost of the new Tapwave Zodiac devices which are very nicely spec'ed for $300-400. Tapwave is too small a firm to absorb overly high prices -- they must to find a good balance between value and margins early, because they may only get one shot at it.

Anyway, it's a nice article by Ed that's well worth reading. It's a good thought provoker, especially when you put prices and value in perspective -- just think how much bang for the buck we're getting in 2003 compared to devices released in 1996 for the same prices. I'm not complaining. :-)

Have a great weekend!

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