Sony announced today that they will be exiting the PDA market in the US and European markets. On the surface, this seems surprising since Sony was the third largest vendor of handheld PDA's in 2003 with a 14% market share. It's also a significant blow to the Palm OS platform and PalmSoure, the licensor of the Palm OS platform, since Sony was the second largest seller of Palm OS devices after Palm One.

One of the reasons cited for Sony's exit from the handheld PDA market is that the handheld PDA market is not a growth market. You could also make the argument that the handheld PDA space was never Sony's core competence.

Sony's core competence is in media and entertainment devices, and handheld PDA's are really productivity enhancing devices. Even though Sony was responsible for many innovations on the Palm OS platform such as MP3 playback and the jog dial interface, they never really understood how the future of PDA's is in all-in-one productivity, messaging, imaging, and voice communication devices.

To understand the future of handheld devices, you only have to look in the gadget bags of technology savvy early adopters. To understand where things are headed in the short term, you should look at what business people are carrying to meet their mobile productivity needs. For business users, the mobile devices are laptops, PDA's, BlackBerry devices and cellphones. Early adoptors will have all of these devices and more such as Flash memory storage devices, MP3 players, digital cameras, digital camcorders, handheld gaming devices, GPS receivers, etc.

The irony here is that Sony has products that cover most of the devices that you typically see inside people's gadget bags. Nobody likes carrying multiple gadgets that all work independently with incompatible communication across devices. People want convergence where you can see your schedule, find directions to get to a meeting, capture meeting notes and diagrams to archive and share via emails and blogs, and also entertain themselves during breaks. It doesn't have to be a single device that does everything, but it should be a few devices that are able to seamlessly interact with each other. If Sony had understood that the future of handheld PDA's lies in the convergence of these devices and was able to translate this understanding into market leadership and innovation, things could have turned out very differently. Handheld PDA's would be a growing and thriving segment driven by the upgrade of outdated PDA devices and Sony would not be exiting the handheld market.

The one company that seems to understand where handheld PDA's are going is PalmOne. More specifically, it's the Handspring team inside PalmOne that is responsible for the Treo 600. The Treo 600 is the beginning of convergence done right. If PalmOne can resolve the manufacturing issues around the Treo 600 and allow the Treo team to continue to innovate, they have the opportunity to singlehandedly jump start the growth of stagnant handheld PDA market. Let's hope they don't turn out to be another Sony...