Handspring's Dubinsky sees fistful of opportunity

Dubinsky launched two of the biggest names in handheld computing: Palm and Handspring. Along with co-founder Jeff Hawkins, she has watched the evolution of the device from digital organizer in its days at Palm to the wireless communications and multimedia tool she envisions for Handspring's Visor.

After shepherding the unprecedented success of Palm, which still accounts for more than 60 percent of the handheld market, Dubinsky and Hawkins left to start Handspring in 1998. The venture's first product, the Visor, was released last fall.

The Visor is based on the same operating system software as Palm and supports many of the same applications. But Handspring aims to differentiate itself on the basis of its expandability via the Springboard expansion slot, which supports cartridges including MP3 audio players, digital cameras and Global Positioning Systems (GPS).

The start-up has experienced some setbacks, including a disastrous direct sales launch marked by software glitches and customer complaints, as well as lags getting the much-hyped Springboard cartridges to market. But Handspring has managed to do in three months what Microsoft has not been able to do in three years: make a dent in Palm's retail market share.

"They lived up to the hype," said George Meier, an analyst with NPD Intelect, which today released market share numbers indicating that Handspring has gained more than 20 percent of the retail market in its first four months on store shelves.

Dubinsky sat down with CNET News.com's Stephanie Miles to share some of her thoughts on the history--and future--of the handheld market.

CNET News.com: As someone who has kind of been in this since the beginning, what is your take on the progress of the handheld market thus far? What are some of the lessons you've learned?
Dubinsky: I started with Apple almost 20 years ago, I hate to say, in '81. And I remember this sensation of being at the beginning of something that was going to be really, really big. When I started at Apple, it was the Apple II.

That's when I started in the computer business. And I'm not a product person; I'm not a visionary. But I looked at that and I said, "You know, this is the start of something that's going to be really, really big. And I don't know exactly what it's going to look like, but it's going to evolve from here and there's going to be just a huge impact on our lives, let alone an opportunity as a businessperson.

So I think that's what we're in. We're in the very early stages of this thing. It's a big new thing. It's the future of personal computing, and it's the future of Internet access. It's going to have very clearly a certain degree of integration with wireless applications.

There are a lot of questions today what those will look like and who will participate in which way. There's many more questions today than answers, but there is no doubt in my mind that if you look out, say, 10 years from now, everybody will be carrying some sort of handheld device. They will be.

Now, they may be phones, they may be handhelds, they may be some combination of them, they may be messaging units. You don't know exactly what they'll be, but I think the impact will be huge and will be very widespread and will touch many geographies, many social strata and many types of people. So that's where we are. We're in the beginning.

Why do you think some major companies, including Microsoft, have struggled for so long in this market?
It's amazing, isn't it? And what's really strange (is) it confounds them even after they can see how to do it and they've seen success shipping for years...It's not even a good secret.

You know, I think there's a couple of things. One of the things on a very general level is that I've seen that companies clearly have difficulty transitioning to a field that's somewhat apart. This is not the PC business all over again.

So all the PC companies have come in--and by that I mean Microsoft as well as Dell or Compaq or any of them really--they've come in and they've basically said, "We're going to do this the same way that we did it successfully before. We did it, we won, so that's a formula that works."

So they apply that formula to this new space and it doesn't fit. But they persist in believing that it will because it worked before. So they're losing because they're doing everything right, not because they're doing everything wrong.

What do you mean?
They're doing everything right for a different business. It's like they're playing a great game of tennis, but the problem is that they're all on a golf course.

Technically speaking, the fact that it's Windows in there--why does it need to be Windows? It doesn't. It needs to work well with Windows. But we're better at synchronizing with Windows than they are. It has to acknowledge that Windows is the leadership and the clear standard on the desktop.

But they keep persisting and believing they have to put Windows in this. And so they keep trying to fit it. They keep reducing and reducing the number of calls and APIs, of course making it less and less robust in order to be able to fit it in.

And then by doing so, they're losing the key thing they gain by it being Windows, which is compatibility. So now it's not compatible, but it's still Windows, which is too big and a processor hog.

Obviously, you have a close relationship with Palm, having founded both companies. With its newest products, which include color cases and lower prices--like the Visor--Palm seems close to duplicating Handspring's strategy. How would you characterize the relationship between the two companies?
I say "we" and "us" because we are a member of the "Palm Economy," as they like to call it. It's true--we benefit from the developer community. We support them and I think we work well together.

There's no doubt that it's a complex relationship, but it isn't direct hand-to-hand combat as everybody likes to say. Probably because the market's just growing so fast that we're both doing very well.

Each product that's introduced in this space brings in more people, and every ad they run brings people in the store. Some percentage of those buy Visors. It is really so early. It is all about market growth, it's all about inventions, all about new products.

That being said, I'm sort of a little surprised that it took them almost a year to come out with color cases. And you look at that product and you say, "Well, OK, I think the style is going to appeal to some audiences; that's a matter of personal taste. They're going to like it or not like it; that's impossible to predict."

Other than that, there's really nothing of substance in the product. So as a style statement, it's interesting. We'll see. Do I look at that and worry about Handspring? No. As far as I'm concerned, we have an incredible product road map, we still can't build enough of them. We have expandability as the key differentiator, and we're just going to continue down our path.

Speaking of expandability, where are all the Springboard modules that had been expected to be available at this point in time?
Some are closer than others, but I've got to tell you, they're pretty major development efforts. So it's not like dashing off a little application. They need to get custom tooling, they have pretty complicated electrical systems, they've all got to have a big application user interface and so on. So we'd love for them to be shipping sooner rather than later, but we have to recognize the reality that they're not insignificant development efforts.

But on the whole, I'm actually pretty pleased at where we are. I don't know how many people could go to the world and say, "Please spend a half a million dollars developing something for a brand new platform that doesn't exist yet," and people would do it.

We have people doing it in very, very large numbers with very large dollars. So I think we've got to prove that out at this point with real modules. And until we do, I don't think that's going to go away. And we're getting there little by little.

Do you think you benefited from Palm's or Compaq's inventory issues? There apparently is some pent-up demand for iPaq and some of the Palms. Do you think Handspring's been a beneficiary of that?
It's hard to tell. I think people are buying Visors because they're interested in what Visor can do and the expandability and things like that. Now there probably are people that are going to buy anything, but in this space I think people are pretty clear on what they want to buy, and they buy that. So I don't think we really know.

Does Handspring still see its mission as expanding the PDA market beyond the traditional tech buyers?
Oh, absolutely, absolutely! There's no doubt we're extending the market. We're bringing in people who hadn't considered these devices before who feel that this is friendly now; they feel it's more for them.

You know, the Palm breed really got off into the enterprise area, and I think that was a bit because they put 3Com on the device.

But enterprise is also a huge market. Is there any interest from Handspring in targeting that?
We'll probably look at the enterprise market with a partner. We're not going to try to make our brand extend that far.

What is actually the truth today is there isn't a big enterprise market. Everybody thinks there is, but there really isn't. And what I mean by that is there isn't a big market of IT departments buying and deploying these devices. There's a lot of people buying them and using them in the enterprise, but in that regard, it is far more similar to having cell phones than PCs.

People buy them, they can write them off or not, the IT department will support them. But the IT department doesn't deploy them. You don't show up for work your first day at Procter & Gamble and get a PC and a Palm device.

What features are you focusing on to offer in future devices?
All I can say is this is our first product, not our last product. We have a pipeline full of products. You'll see us over the next year fill out a whole family of products. There's going to be products of different sizes and different displays and different technologies and rechargeable, non-rechargeable. There's a lot of variation.

The reality is not one product suits everybody, and...there are different sort of segments to cover. So we started at one point. We wanted to start at the low end, so we could get high volume.

We wanted to include expandability as the key differentiator, which will continue in most of our products, perhaps not all. And now we have a lot more products to fill out, so there's a big range to cover. But beyond that, it really doesn't make sense for me to go into specifics, but certainly we think color is going to be important; we think form factor is important.

All of this is going to be important. So the question of when and how--priorities of how we fill out the product line--is just a matter of tactics.