Palm's wireless disconnect

Take Palm's new Tungsten W device. The company began selling the combination cell phone, e-mail and organizer device on Friday, but early reviews haven't been flattering. Although critics noted a number of problems, one of the biggest from the point of view of business users could well be the lack of server software enabling secure, wireless access to corporate data.

The Milpitas, Calif.-based company and other handheld makers have been trying to woo corporate customers, who tend to buy hundreds of devices per order. The trouble for device makers has been convincing these potential customers that handheld devices increase the productivity of their employees.

Adding cellular voice, two-way messaging capabilities, and wireless access to corporate information are the latest lures, but a majority of companies want a one-stop shop for those features and the devices that use them. Palm's software designed to allow customers to wirelessly access e-mail and corporate data using the Tungsten W isn't ready yet, which analysts believe takes the air out of Palm's latest offering.

"They're better off delaying the product than selling it without the server software," said Todd Kort, an analyst at Dataquest, a unit of research firm Gartner.

Ever since Research In Motion began delivering wireless e-mail with its addictive BlackBerry service and device, competitors have been scrambling to catch up. As the months creep by with no all-in-one device in sight, Palm and other handheld makers face a big problem.

Handheld shipments slipped 9.1 percent in 2002, to 12.1 million units, compared to 2001, according to Dataquest. On Thursday, Palm confirmed that it had let go of 19 percent of its work force, or about 200 employees, over the course of its third quarter. The cuts were across both its hardware and operating system subsidiary.

The weary market is forcing manufacturers to branch out into new areas, with the biggest potential payoff coming from corporations. But big business orders are less likely to come for device makers who don't offer their own ready-to-go wireless service--something Palm currently lacks for the Tungsten W.

"Modest step forward"
The $549 Tungsten W is a more richly endowed product than Palm's previous wireless devices: It includes a color screen with a resolution of 320 pixels by 320 pixels, a Secure Digital expansion slot and one of the faster radios available for accessing GSM (Global System for Mobile Communications) and GPRS (General Packet Radio Service) networks.

However, it runs version 4.1 of the Palm operating system and not the latest version, Palm OS 5. In addition, it contains a 33MHz DragonBall processor from Motorola. The company's Tungsten T device, which was introduced last October at the same time as the Tungsten W, runs Palm OS 5 and uses a Texas Instruments 144MHz OMAP processor.

Although the Tungsten W comes with a built-in keyboard and plug-in earpiece for making cellular calls, Palm is downplaying the device's cell phone capabilities. Handspring has been selling a similar device, the Treo 300, since August of last year.

"From a technological perspective, Palm is taking only a modest step forward," Paul Coster, an analyst with J.P. Morgan Securities, wrote in a research note Thursday. And without wireless access software, the Tungsten W is a "me too" product in a market full of similar devices, and falls short of offerings from RIM and Good Technology.

Palm does offer wireless access software, called the Tungsten Mobile Information Management Solution (MIMS), for older wireless devices. Those include the i705 and m500 series handhelds with attached wireless local area network cards, which cost $2,499 including a 25-client license. The software lets information technology managers securely maintain the devices that are part of their network from one point while also enabling employees to access information, such as e-mail or corporate databases. The software resides on a company server.

The Tungsten MIMS is part of Palm's increasing efforts to address the enterprise market, which analysts have said is the next growth opportunity for handheld makers. Palm acquired the technology behind the program in its purchase of ThinAirApps.

It is currently possible to get wireless access to corporate data through the Tungsten W device, but the configurations are complicated and rely on third-party providers. Developers creating software that supports Tungsten W include Jarna, JP Mobile, Notify and Visto. In addition, Palm has been working with BEA Systems, IBM, Oracle, PeopleSoft and J.D. Edwards to ensure that their ERP applications work with the Tungsten W.

But "piecemeal solutions" are difficult to sell to companies, according to ThinkEquity analyst Jason Tsai.

"Enterprises don't want to have to deal with multiple vendors every time they have a problem," said Tsai. "(Research In Motion) represents a single call (for hardware and software issues), which is why they have been successful in addressing this market. They control the end-to-end solution."

For its part, Palm says it never planned to have the software available at the time of the Tungsten W launch, according to spokeswoman Marlene Somsak, who added that the company does not have a time frame for when versions of the software will be available.

The i705 and wirelessly enabled m500 series use Cellular Digital Packet Data (CDPD) wireless networks to send and receive data, while the Tungsten W uses higher speed GSM and GPRS networks. The two networks are "worlds apart," according to IDC analyst Kevin Burden.

Getting in with Good
With the exception of RIM and start-up Good Technology, few other companies have been able to serve up an all-in-one product that can offer always-on e-mail access. Palm and Handspring do offer redirector e-mail software, which is not as easy to use or as desirable to IT managers as the services from RIM and Good Technology.

Palm's operating system subsidiary, PalmSource, is working with Good Technology to make Good's wireless synchronization software, called GoodLink, run on the Palm operating system.

Coster speculated that Palm's hardware group would have a device available with Good's software by the middle of the year.

RIM had 463,000 BlackBerry subscribers as of Nov. 30, according to company figures, and it expects to add another 60,000 to 70,000 subscribers in the current quarter. Palm shipped 1.5 million units worldwide in the fourth quarter. RIM's subscribers represent recurring monthly revenue for RIM, as well as profits from server and client software and devices.

The absence of server software enabling wireless access to corporate information may not lock Palm out of the enterprise market completely, according to Burden, because companies are still developing their plans.

"Much of what companies do when it comes to deploying technologies depends on what their competitors are doing," said Burden. "They are either trying to gain or protect a competitive advantage."

At the moment, because of the sluggish state of the economy and low IT spending, many companies aren't investing in new technologies, negating any competitive reasons to start using wireless access technology, according to Burden. This reduces the size of the potential market but also makes the companies that are buying the technology that much more valuable.

The companies that are buying wireless access services may be willing to deal with a piecemeal solution because they feel that if they don't, they're giving up a competitive advantage. Those companies may also find it easier to have a smaller company develop a custom version of wireless data access software. Still, the larger market is waiting for an all-in-one and easier to manage device with wireless data access.

But the Tungsten W does keep Palm on the radar, according to Coster.

"We do not believe it will spur growth for the company, though as a stopgap offering, it probably will help Palm continue to stay visible with enterprise accounts," Coster wrote.