In the last year, Palm has slipped from its dominance in the PDA market to become a fading presence, particularly at the high end of
the market--where the biggest profits are.
Palm is losing ground to Pocket PC-based devices, primarily from Compaq Computer (and its iPaq) but also
from Hewlett-Packard. One reason for its slip is the advantage that Pocket PC
devices have in terms of fundamental operating system capabilities. The Palm OS still
lacks multithreading, multitasking and other features that are
considered basic in the enterprise market--and that have always
been part of Windows CE devices (including Pocket PC).
A year ago, Palm promised to have a completely rewritten
operating system and a new generation of ARM-processor-based PDAs
on the market in 2001. Now that deadline has been pushed to late
2002, and it may slip into 2003. Meanwhile, Pocket PC 2002
devices all run on Intel's StrongARM chip.
This is bad news for Palm's aspirations to grow market share and profits by
pushing more heavily into enterprises--and for Palm users, who
often need more capability than current systems offer, to enable
various enterprise-class applications.
Meanwhile, Microsoft plans to release Windows CE 4.0, with native
support for the company's .Net services, this month. Palm is not even
talking about Web services, and in fact does not even ship a
browser (although Handspring Visors do ship with an integrated
This gap could be the deciding factor for enterprises:
Companies that are considering significant investments in
developing Web services will not buy pervasive computing devices
that do not support .Net or a Java-oriented Web services model.
For .Net, we expect Palm to become primarily a thin-client access
device, putting it at a great disadvantage in Microsoft-centric
As a device for basic PIM (personal information manager)
activities and simple applications (such as basic checklists and data
tracking), Palm still has a strong following among enterprises.
The problem for Palm is that, while most companies are
initially deploying PDAs to users for PIM use, they are
also looking to the future and determining what other applications might
make it to the handheld device.
Although Palm offers a simple OS, application development can be more complex when compared to Pocket PC because of the latter's similarity to Windows and Microsoft's traditional strength in supporting application
For applications with any degree of complexity, Pocket PC
devices, using Visual Basic or Visual C++, are a better alternative
than Palm (plus, Pocket PC will soon become part of the .Net
framework development environment). Although Palm development can
also be done in C++ or other development environments (such as VB
add-ons, Metrowerks and Satellite Forms), this requires an information-technology
developer to learn new skills and the PQA language. In addition,
Pocket PC offers affinity to Internet Explorer, Exchange, Word,
SQL Server, Exchange and so on, and is a more secure environment than
Palm saw a huge jump in sales in the consumer market after
Thanksgiving. However, we believe this was driven by sales of its
older, heavily discounted Palm Vx, not its newer high-end units.
While Palm will continue to dominate the consumer market, where
it has little competition, we expect it will be difficult for the company
to earn profits as a low-end vendor.
Palm is not a low-cost producer, and without high-end sales it will have trouble finding the resources to keep up with Windows CE in OS development.
We expect Palm to be a continuing, but fading, presence in
enterprises for several years, primarily in PIM applications.
Enterprises should focus their PDA development efforts for more
mission-critical corporate applications on Windows CE/Pocket PC.
Meta Group analysts Jack Gold, Dale Kutnick, David Cearley, John
Brand, and Carolyn White contributed to this article.
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