The worldwide market for handheld devices experienced its third straight year of decline in 2004. Fierce competition from converged devices such as smart phones explains the decline, according to analyst firm IDC.

"Consumers don't see the need to invest £300 in a handheld device if a smart phone can do the same basic tasks," said David Linsalata, an analyst in IDC's mobile devices program.

In 2004, shipments of handheld devices slipped to less than 10m units for the first time in five years. During 2004, 9.2m devices were shipped, a decrease of 13 percent from last year's total of 10.6m devices shipped. "The vendors haven't been able to break away from the personal information manager [PIM] market," Linsalata said. "The handheld computer needs to evolve beyond its core functionality."

One such example is GPS (Global Positioning System) capability, which most vendors offer today. But Linsalata couldn't point out any new drivers likely to push the market up to its peak levels of 2001. "Not yet, but the handheld computer has certain adequate advantages such as larger and brighter screens, bigger batteries, and attached keyboards," he said.

In 2004, two top vendors – Sony and Toshiba – left the handheld market except in Japan. Linsata said he doesn't think that their departure indicates a trend: "I haven't heard anything from the top five vendors. The handhelds do complement their entire enterprise, offering a mobile solution."

As manufacturers convert many handheld computers into smart phones and equip many mobile phones with PIM features, defining a handheld device can be difficult. Devices with telephony features are not included in the IDC survey, but devices with wireless capabilities that permit internet access and support text communication are.

Even though the market for handheld devices has declined in each of the last three years, shipments increased by 37.4 percent during the last quarter of 2004. The upturn was probably due to Christmas sales.