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General Magic spins off handhelds

Putting all its chips on its Portico voice-access service, General Magic is spinning off its handheld computer division.

Putting all its chips on its Portico voice-access service, General Magic is spinning off its handheld computer division as an independent company called DataRover Mobile Systems.

DataRover will focus on both hardware and software for mobile workers in markets such as utilities, health care, and transportation--essentially General Magic's original business.

General Magic will retain a 49 percent interest in DataRover and contribute $3.4 million in cash plus technology, the company said. DataRover employees also invested in the new venture. Fewer than 50 employees moved to DataRover, leaving 130 at General Magic, which delayed its earnings report, originally scheduled this week, until November 11.

"It's a natural thing for the company to do," said Lewis Alton managing partner at San Francisco investment firm L.H. Alton. "The real play in this company is Portico. It seems there's a real place in the marketplace for it."

The Portico service, code-named Serengeti during more than two years of development, provides a universal mailbox where a mobile worker can call a single number to have voice mail, email messages, and faxes read aloud by an automated system. Users also can get their address books and calendars through the same service.

"I'm interested to see what comes out of the spin-out," said Chris Shipley, editor of industry newsletter DemoLetter, who described General Magic as "still on the comeback trail."

"Some of the technology got shelved from the old days. If they can breathe some life back into what they had, it could be really exciting," Shipley added.

Steven Schramm, now DataRover chief executive after running the division inside General Magic for four years, said the spin-off was made because there was little synergy between the two businesses.

"They're going after horizontal markets; we're going vertical," said Schramm, adding that the company's positioning as a single unit was difficult to explain. "We decided that my business was self-contained--no conflict, no confusion."

DataRover will combine its customizable handheld computer DataRover 840, powered by the Magic Cap 3.1 operating system, software applications, and development tools. The device can capture and store data remotely, then transfer it to databases such as Oracle and Sybase.

"We are absolutely 100 percent focused on vertical markets, and we don't want to spread ourselves too thin," Schramm added, estimating the market at $500 million to $1 billion a year and growing rapidly.

Priced at $1,095 for a single unit, with volume discounts, DataRover competes with laptop or notebook computers at the high end, other makers of dedicated devices like Fujitsu, and with consumer-oriented Windows CE devices and PalmPilots.

In its vertical strategy, DataRover is going after some of the same markets Apple Computer pursued with its Newton device before abandoning the handheld in February 1998.

General Magic got a notable boost in March when Microsoft licensed some technology and invested $6 million in the company. In June, General Magic raised another $35 million privately.

Portico, officially launched July 30, is currently being marketed by 30-plus resellers around the country and is being tested by a number of large telephone carriers, who are key part of General Magic's distribution strategy. They include Bell Atlantic Mobile, BellSouth Cellular Corp., Cellular One, and AT&T.

General Magic is currently advertising Portico, which it calls a "virtual assistant," in national print publications as well as radio ads.

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