A Treo Your Mom Could Love

Playing catch-up to rival device manufacturers, Palm Inc. today said it is launching the Treo 680, the company's first truly consumer-focused device.

The new Treo, targeted at a broader market than Palm's traditionally business-user focused products, comes in a variety of colors, offers an array of consumer-friendly applications and functions, and is priced well below previous Treo models.

Treo sales have been hammered by the introduction of lower-priced, consumer-focused devices like the BlackBerry Pearl, from BlackBerry , and Nokia Corp. (NYSE: NOK)'s E62. (See Nokia, RIM & Moto: 'Prosumer' Trinity.)

Speaking at a packed press conference at New York's Javits Center, CEO Ed Colligan declined to specify the price at which the Treo will sell, either through carriers or direct from Palm via the Internet. "The Treo 680 will sell at a great new price point," said Colligan -- leaving open the question whether the 680 will dip below the $200 threshold, as with the Pearl. "It'll be very competitively priced to any products with comparable functionality and capability on the market today."

Running on the Palm operating system and using a quad-band radio over GSM/GPRS/EDGE networks, the new Treo is one of the first devices from Palm without an external antenna. It also has support for common Microsoft Office applications including Word, Excel, and PowerPoint, the ability to view full PDF attachments including graphics, an MP3 player, a camera, and built-in Bluetooth infrared capability, along with jazzy user-friendly applications like a mobile version of Google Maps. It does not, however, have the ability to run over WiFi networks, a disappointment to European users, many of whom are still locked into expensive limited-usage data plans.

The lack of WiFi capability, says Carmi Levy, senior research analyst at Info-Tech Research Group , could be the new device's Achilles heel.

"Palm has long subscribed to the belief that you cut costs by reducing functionality," Levy comments. That kind of thinking doesn’t impress potential customers of this specific device, and the door is now open to similarly featured smartphones that also offer WiFi."

Colligan acknowledged the need to move beyond Palm's traditional markets -- which many industry observers have seen as an overdue move from the Sunnyvale, Calif.-based smartphone maker.

"We're crossing that chasm into a much bigger audience than ever before," he said, estimating the potential market for the 680 as nine times larger than that for previous Treos focused on mobile professionals.

In a related development today, palmSource, the Palm Inc. spinoff that owns and develops new versions of the Palm OS, announced that it is changing its name to that of its Japanese parent company, Access. Palm said in its annual report that conflicts over deadlines for new operating systems represent a significant risk to future sales of the Treo. In response to an audience question, Colligan made it clear that Palm is wedded to neither the Palm OS nor the company that owns it.

"We're committed to the compatibility with the 30,000 applications that have been developed [for the Palm OS] and to the community of developers that we are essentially the core driver of right now," Colligan said, choosing his words carefully. "What we really care about is moving that compatibility forward any way we can -- and that may be in partnership with Access or it may be in another way."

The OS issue desperately needs resolution, many observers believe.

"The Treo 680 runs Palm OS 5.4," points out Levy in an email. "This is an ancient OS that should have been replaced years ago, but Palm has been so focused on spinning off its OS division into a separate company, and then selling it, that it has lost its ability to independently deliver smartphones that run competitive operating systems."

The 680, says Todd Kort, principal analyst at Gartner, could be "the last Palm OS device we will see."

To support the new Treo, which comes in a palette of trendy shades including graphite, copper, arctic, and crimson (Ed. note: No teal?), Palm will partner with what Colligan calls "affinity brands" like Flickr and Yahoo! to roll out a $25 million ad campaign based on the tagline " Not just a cell phone: a Treo."

In the run-up to today's announcement, many analysts have speculated that margins for the new device will be low, as Treos remain relatively costly to produce as compared to rival devices. Interestingly, the new 680 is the first Treo produced by Inventec, not HTC, Palm's traditional primary original-device manufacturer, which has over the last year launched an ambitious line-up of mobile devices under its own brand.

Palm stock, which has dropped by almost 34 percent since early May, was trading slightly higher on the Nasdaq today following the announcement.

— Richard Martin, Senior Editor, Unstrung

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