HP Repackages the iPaq

Hewlett-Packard takes aim at the BlackBerry with its compact, super-versatile iPaq 500 series smartphone

When you think iPaq, you think a handheld organizer with a wireless data and phone connection.

Soon, Hewlett-Packard (HPQ) hopes you start equating the iPaq brand name with a more traditional-looking wireless phone as well. The company announced on Feb. 11 the new iPaq 500 series at the 3GSM conference in Barcelona, Spain. Rather than looking something like a version of Research In Motion's (RIMM) BlackBerry wireless devices, it will look more like wireless phones turned out by Nokia (NOK) or Motorola (MOT). The phone will be available in the spring of 2007. HP did not disclose a price for the new smartphone.

A Universal Device

While the iPaq 500 series will run the latest version of Microsoft's (MSFT) operating system for handhelds, Windows Mobile 6—also announced at 3GSM on Feb. 11—it will boast some pretty powerful features, such as the ability to make traditional cell-phone calls as well as less expensive Internet calls. The device is capable of connecting to the Internet by way of the wireless phone networks, but also via Wi-Fi hotspot in the home or public places such as those operated by T-Mobile (DT). The gadget will sport its own VoIP software and, where the technology is supported, will allow users to hand off calls started on the Internet to the wireless network.

The idea, HP says, is to give companies who already use Internet phone systems the option of dispensing with a desktop phone and unifying the office phone and the mobile phone in one device.

The new phone is a departure for HP, whose iPaq devices—a brand it inherited with its 2002 acquisition of Compaq—have generally been built to resemble PDAs but include wireless phone features. But unusual variants within the iPaq family have been appearing in HP's lineup over the last year. One is the rx5915, which was both a PDA and a GPS-enabled personal navigation device, but without a wireless phone (see BusinessWeek.com, 11/14/06, "HP's Location-Savvy PDA").

Most Popular Platform

HP is one of the many companies running Windows software and gunning for the market first established by RIM. While RIM sold some 3.5 million devices in 2006, HP was a distant third behind Palm (PALM), having sold some 1.7 million iPaq devices, according to research firm Gartner (IT).

But Windows Mobile and other versions of handheld software from Microsoft are way ahead of Palm and RIM in the platform market-share race. Gartner says that out of a market of 17.7 million PDAs sold last year, nearly 10 million ran some version of Windows CE from which Windows Mobile is derived, vs. about 2 million running the Palm OS, while another 950,000 ran the Symbian OS.

Gartner's estimates don't count those devices among the regular wireless handset market, which is where the real volume is. Gartner counts devices like RIM's Pearl and Palm's Treo, which combine features of a PDA into packages that look more like traditional wireless phones, as just that—traditional wireless phones. Gartner says 251 million wireless phones were sold in the third quarter of 2006, and estimates sales for the year will fall just short of the 1 billion-unit mark, at 986 million units. In that market, HP would come in as just a bit player, far behind Nokia, Motorola, Samsung, Sony Ericsson (SNE) (ERIC), and others.

Challenging the Gold Standard

The 500 series is also an interesting competitive thrust against RIM, whose BlackBerry devices have long been the favored device—and status symbol—of busy corporate executives. However, RIM's Pearl is intended to be a sort of crossover device that appeals equally to corporate types and certain high-end consumers in the same way that Palm's line of Treo devices has (see BusinessWeek.com, 11/13/06, "A Shiny BlackBerry Pearl").

Some observers say the time to go on the offensive against market leader RIM is now. Research house IDC says that RIM has been thrown on the defensive by devices that are BlackBerry-like in appearance and features. IDC estimates that some 63 million handhelds—what it calls "converged mobile devices—will be in use worldwide by 2010. While the BlackBerry has become a sort of "gold standard" among corporate IT managers, IDC expects Microsoft's consistent revision of Windows Mobile—and the devices it runs on from vendors like HP, Dell (DELL), and numerous others—to dominate nearly a third of the market by 2010.

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