Palm plays catch-up with new device

MATT HARTLEY

From Thursday's Globe and Mail

September 26, 2007 at 8:51 PM EDT

Once a dominant player in the market for handheld computing and communications devices, Palm Inc. now finds itself struggling to keep pace in a world clamouring for multifunction cellphones.

In the late 1990s the company's Palm Pilot device enjoyed a huge share of the mobile-device market, which consisted largely of personal digital assistants. Early this decade, it picked up the Treo device, which combines a mobile phone with e-mail and web browsing, but it has lagged recently behind market leaders Nokia Corp., Motorola Corp. and Research In Motion Ltd. when introducing new gadgets.

Thursday, Palm executives introduce their attempt to catch up. They are scheduled to hold a joint press conference with officials from mobile provider Sprint Nextel Corp. in New York, and unveil a new Palm smart phone. Analysts believe the device will be similar to the Palm Treo 500v launched this month to Vodafone customers in Europe.

Info-Tech Research Group analyst Michelle Warren says it may be difficult for Palm to make up for lost time.

“I don't think they're going to catch up this year or next year,” she said. “But I think it is possible for them to increase their market share. It's doubtful that they'll hit the numbers they once held … but the market is much bigger now so it will be easier for them to grow.”

Last year the global smart phone market was dominated by a handful of companies. Nokia alone accounted for nearly half of all smart phones shipped worldwide, according to data supplied by market-research firm IDC. Palm accounted for less than 6 per cent of the market in 2006.

While the company's Treo mobile phone line has undergone some minor changes, Palm has suffered from a lack of design innovation on the smart phone front, IDC analyst Chris Hazelton said. “It's something that [consumers] may replace every 12 to 18 months,” he said. “So if you have a device [design] that is more than 2 or 3 years old, you're at somewhat of a disadvantage.”

One way Palm could win back customers is by creating an extended services model, similar to Apple Inc.'s iTunes or Nokia's Ovi service, which allow users access to music, videos and games, he said. But profits are down, and the Treo has faced stiff competition in the since the launch of Apple Inc.'s iPhone in June.

Earlier this month, Palm chief executive officer Ed Colligan announced the company would be scrapping their Foleo “mini laptop” device before the product shipped. The company decided to dump the Foleo – which would have operated on a different operating platform than the company's smart phones – in favour of focusing on the development of a single platform to accommodate all of Palm's mobile devices, he said.

An internal shakeup may also provide new life to the embattled company. Earlier this year Palm brought Jon Rubinstein, Apple's former hardware chief, on board as executive chairman and added software engineer Paul Mercer, who helped create the iPod.