New Dell handheld targets HP and Palm. (Top Technology Showcase).

In what many observers are characterizing as a bold move to grab control of the PDA business, Dell Computer Corp. entered the fiercely competitive handheld market in late November with the introduction of the Axim X5.

The Pocket PC Professional-based Axim is expected to retail for about $300 (with rebate), significantly less than the $500-$600 that most Microsoft OS-based digital assistants command. (At press time the Axim was scheduled to be available on November 25. A $199 model should also be released.)

In fact, the Axim is widely believed to be targeting the market currently dominated by low-cost Palm OS-based devices; Palm-compatible devices are purchased mostly by consumers, not business users, and can be had for as little as $99--though the company recently introduced the Tungsten T, which costs $500.

According to recent Gartner Dataquest numbers, Palm OS-based devices account for about 75% of all PDAs sold. Gartner indicates that in the third quarter of this year, Palm shipped about 800,000 units, more than the combined total of HP, Sony, and Toshiba, numbers 2,3, and 4 in the market, respectively.

The more expensive Axim model will feature a speedy 400MHz Intel StrongArm processor and include a massive (for a PDA, anyway) 64MB of SDRAM. It will include both CF 2 and SD expansion slots, as well as rechargeable batteries. Though neither model will have wireless connectivity, reportedly Dell will be adding Bluetooth and WiFi support next year.

But Palm is not the only company in the PC giant's crosshairs. With shrinking margins and slowing growth in the PC business, Dell has been seeking ways to profit in other technology markets. The Round Rock, Texas, company recently indicated that it will soon begin selling its own branded printers, going head-to-head with HP, the world's largest printer OEM. The Axim, Dell clearly hopes, will also grab market share from HP's well-regarded but expensive Jornadas and iPaqs, which run the Pocket PC OS.

But Palm is in a much weaker financial position than I{P, and surviving a Dell attack on its market won't be easy. Dell's massive revenues dwarf those of Palm, and as a much more diversified company, it can stomach thinner margins on its PDAs. Palm, on the other hand, can ill-afford a price war with Dell, which would be disastrous for the PDA maker's bottom line.

Of course, one question that remains unanswered is whether consumers (as opposed to business users) want all of the added features and complexity of Pocket PC-based devices but have simply been unwilling to pay their high prices. If in fact the Axim includes most of the bells and whistles of the $600 units--at half their cost--Palm may have some catching up to do, from a technological standpoint. If, on the other hand, Palm OS compatibility, broad application support, simplicity, and price are more important than Windows compatibility, Palm should be able to withstand the Dell assault.

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