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AOL, Sonicblue ink deal on handhelds

AOL will promote the company's Diamond Mako handheld, and Sonicblue will add AOL e-mail and instant messaging to its device.

America Online is diving into Sonicblue's Diamond Mako.

AOL and Sonicblue announced a multiyear agreement Monday in which AOL will promote Sonicblue's Diamond Mako handheld computer, and Sonicblue will make AOL e-mail and instant messaging available on its PDAs (personal digital assistants).

The agreement is another step in Dulles, Va.-based AOL's strategy to make its service available to its 27 million subscribers through more than just PCs. Currently the plan, known as AOL Anywhere, reaches pagers, set-top boxes, phones and other PDAs. For example, two-way pager maker Research in Motion and PDA maker Palm offer AOL on their devices.

For Santa Clara, Calif.-based Sonicblue, AOL's subscribers are an attractive audience for a device that hasn't caught on in the United States and has a waning appeal in Europe.

Sonicblue's Diamond Mako is a rebranded version of Psion's Revo clamshell-shaped handheld. Sonicblue and London-based Psion announced in October that the companies will jointly develop and sell the Diamond Mako, which can use a separate modem or Net-enabled phone to access the Internet.

At the time, Paul Crossley, marketing manager for the Diamond Mako, speculated that Diamond's brand name would help sales of the handheld in the United States, where Psion has never been able to get a foothold. The Revo held a decent share of the handheld market in Europe, but that is changing.

A new report from research firm Canalys.com notes that Psion's share of the handheld market in Europe fell dramatically from 17.5 percent in 1999 to 8.9 percent in 2000. The report adds that the company only sold about 175,000 handhelds last year in Europe, while Palm sold 1.2 million units there.

The Psion device is one of the few left on the market to use a clamshell design with a keyboard. Most PDA manufacturers have turned to the tablet-style design made popular by Palm. Many devices using what is now Microsoft's Pocket PC operating system evolved from clamshell to tablet after finding limited interest among consumers.

Like AOL, Sonicblue is trying to diversify its efforts. After selling its graphics chip business to Via Technologies last year, Sonicblue, formerly S3, changed course and its name and began targeting new devices. Sonicblue spun off its Internet appliance division into subsidiary Frontpath but kept its stake in Diamond, HomeFree networking products, and Rio MP3 players.

In spite of America Online's "strong deals" with device makers, the effectiveness of AOL Anywhere is hard to measure so far, said Alex Slawsby, an analyst at IDC.

"Given the infancy of the mobile market, it?s difficult to say how effective the strategy has been," Slawsby said.