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Palm's Up? Palm's Out?

Light Reading
LR Mobile News Analysis
Light Reading
12/17/2001

A lot of news for Palm these days is pretty grim. However, their latest acquisition of ThinAirApps for $19 million in stock should give them a better position in the crucial enterprise market. And not a minute too soon, according to Dr. Egil Juliussen, author of a report from eTForecasts on the PDA market, released December 12th. "In the next few years you will see the growth in purchasing move away from the individual to volume purchases by larger corporations," Juliussen says. "In the next two years PDAs will move into the corporate networks." ThinAirApps allows employees in the U.S. to access Microsoft's Outlook functions - calendar, e-mail, contracts, and notes - over the Palm VII wireless. We'll see if that can keep Pocket PC at bay.

Stock Sale

One of the lessons learned during all the internet busts was, don't take a deal for stock. Palm's stock has gone from $100 a share at its IPO to $3.50 a share today. It really can't go much further down. ThinAirApps must be betting that their deal, coupled with Palm's June 6th, 2000 deal for Actual Software Corporation, a leading provider of enterprise email solutions, gives Palm a stronger sales strategy. Todd Bradley, executive VP and COO for Palm's Solutions Group, seems to think so. "Acquiring ThinAirApps is a lynch pin of our long-term enterprise and wireless strategies," he says. "This move, combined with our previous acquisition of Actual Software Corporation, give us the server-side and client-side software needed to provide integrated, end-to-end messaging solutions for the enterprise customer." Enterprise PCs run Microsoft Windows, obviously. How can a company compete with Microsoft in this arena? Well, having 70% of the current market share helps. But Palm's OS will be a make-or-break project . In fact the company has split itself in two, to create a separate division for OS and hardware.

There's been a lot of news about Palm lately. CEO Carl Yankowski was ousted in November, and Palm's m500 was much delayed but received Mobile computing's best handheld award for 2001. One of the most mysterious announcements by Palm was on December 7th, when a $50 million convertible note was issued by Palm to one investor who was not identified. The individual could be Bill Clinton, Michael Jackson, or Michael Jordan, or the individual could also be a Palm insider not wanting to look like Palm needs in-house money to bolster their company. Or a member of a competing company who wanted to cover all bets. Bill Gates?

Pocket PC Adds Entertainment

While Palm races to catch up with enterprise sales, Pocket PC's latest partnership is adding the frosting to their already-impressive product. On December 13th, Vizario announced that the Vizario System is now a featured product at Windows XP software catalog. The technology uses the Windows Media Video capabilities of Microsoft's operating system for handheld devices. Vizario Wireless Software System will give users the ability to customize web page summaries, audio clips, text, graphics, and video clips.

Dave Schwartz, Vizario's CTO, says that their technology will give the user the ability to manage the more sophisticated graphic offerings of a Pocket PC. "If you want a show containing current video clips from all your favorite Web news sites, Vizario will put that together and have it ready for you to watch at any time." While management of video clips is not a crutial like corporate syncing, this does show the distance between the offerings of Palm and Microsoft at present. Microsoft's fundamental offering is mobile corporate syncing, now you can see videos too.

Prediction: Pocket PC Takes Market Share in 2005

Palm's present emphasis on sales to individuals, coupled with predicted growth in the smartphone market and the introduction of PDAs running Linux, makes Palm's market share look questionable. In November this year, Nokia Communicator 9210 overtook both Palm and Compaq in smartphone/PDA sales in Western Europe with 28.3% of the Western European market.

According to eTForecasts' projections, PDAs will reach 43.5 million units in 2005, with nearly 16 million Pocket PC units sold, compare to 14 million Palm units sold. How does Dr. Juliussen think that Palm can stop slipping in the market? "They made some serious mistakes in April," he explains. "I said they should have fired the CEO then, but they took a couple more months to do that. If the rumors of a merger with Handspring come true, then Palm has a chance of continuing their dominance. All the brains of Palm are at Handspring. I'm not sure what type of bad blood remains between the two companies, but a merger would certainly change the direction of the market."

Figures From eTForecast's Report:

Worldwide PDA Unit Sales (in millions):
2001
2005
2007
Pocket PC
4,205
15,960 24,355
Palm OS
7,595
14,035 16,395
Other OS
4,575
13,530 20,620
Worldwide PDAs Total
16,375
43,525 61,370


USA PDA Unit Sales (in millions):
2001
2005
2007
Pocket PC
1,430
5,565 8,445
Palm OS
4,780
8,390 9,710
Other OS
430
1,725 2,955
USA PDAs Total
6,640
15,680 21,110


When Hell Freezes Over

Dr. Juliussen's talks of a merger between Handspring and Palm sounds like trying to get the The Eagles back together: they promised that it would only happen "when hell freezes over." Then the deal became too lucrative to resist. But on November 20th Palm and Handspring both announced that the rumors of their merger were just rumors. Perhaps there is bad blood between the companies. (Jeff Hawkins and Donna Dubinsky designers of the original Palm Pilot, left Palm in 1992 to start Handspring.) But a lesson can be learned from The Eagles example. The Eagles Greatest Hits is now the best selling album of all time. In the meantime, Palm's purchases of ThinAirApps and Actual Software Corporation seems to be steps in the right direction.

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