Yesterday's news that Palm Inc is acquiring Handspring Inc -- its rival in the market for handheld digital organizers or personal digital assistants (PDAs) -- is welcome for Taiwan's growing PDA industry, analysts said yesterday.
"Palm needs to go for greater economies of scale if it is to compete with its rivals," said James Huang, (
"I think Palm may outsource more orders to Taiwan to cut costs," Huang said.
Palm is currently cooperating with two local companies, Asustek Computer (
The software Palm developed to power its PDAs, called Palm OS, is losing out to the increasingly popular Pocket PC software from Microsoft, Huang said.
"Pocket PC has greater multimedia power than Palm OS and is growing its market share as a result. The Palm-Handspring merger shows that Palm wants to fight against Pocket PC," he said.
Handspring, which focuses on smart phones, is currently not outsourcing the manufacture of its products to Taiwan.
When Handspring is taken over by Palm, there is a possibility that more orders will flow to Palm's existing Taiwan partners, Inventec and Asustek.
"These two Taiwan companies should see an increase in orders as a result of the take-over," said Martha Chen (
"but the combined Palm-Handspring company will have more bargaining power, like Hewlett-Packard-Compaq which used its size to squeeze better prices out of manufacturers," Chen said
Based on the Hewlett-Packard model, Huang also said orders from the new combined company might be a poisoned chalice.
"The merger may lead to more orders, but at much lower prices," he said.
"Look at HP the price-killer. If you have an HP order, your margins are very slim, and you may even end up losing money. You may see more on your top line, but your bottom line is not so good," Huang said.
One loser in Palm's competitive strategy is Picvue Electronics Ltd (
The company used to supply the monochrome display screens used in Palm's non-color PDAs. Palm is now buying small color panels from Japanese and Korean manufacturers instead to feed the demand for color-screen handheld devices.
Last year Taiwanese manufacturers shipped 4 million PDAs, double the figure for the previous year, according to figures from the government-funded Market Intelligence Center (MIC).
Already in the first quarter of this year another 1 million units were shipped, with a further 1.3 million forecast for this quarter, a PDA analyst at the MIC told the Taipei Times yesterday.
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