Could cell phones be the Palms of the future?

Wireless phone companies are ratcheting up their ambitions and offering mobile Internet services, targeting the market and customer base dominated by Palm Pilots and their handheld rivals.

John Borland Staff Writer, CNET News.com
John Borland
covers the intersection of digital entertainment and broadband.
John Borland
3 min read
Wireless phone companies are ratcheting up their ambitions, targeting the market and customer base dominated by Palm Pilots and their handheld rivals.

Their goals are grounded in new mobile Internet services that allow access to address books, calendars, email and other features that have formed the cornerstone of Palm's success. If consumers can use all these features, and make a phone call, many might give up their allegiance to their Palm organizer, say the most ambitious phone backers.

It's not yet a fair fight. Cell phone screens are tiny and far more difficult to use online than are Palm organizers. But each device is changing to act more like the other, and some analysts agree that the two devices will eat into each other's markets as consumers decide they no longer need both.

"A lot of people will give up something," said Jill House, an analyst with market researcher International Data Corp. "People will give up the device that never made sense for them in the first place."

The convergence of Internet features is being driven by an explosion of new technologies from wireless Internet companies, which are quickly bringing many of the medium's amenities to mobile telephones--ranging from e-commerce to portal services like address books, calendars and email.

Analysts predict that the number of wireless Internet devices, including cell phones and handheld computers, will pass up the number of PCs sold in the next few years.

Americans are catching the overseas craze for basic mobile phone service, however. More than 74 million cell phones are in use in the United States today, a figure that will rise to more than 139 million by 2003 according to International Data Corp.'s (IDC) most recent estimates. Worldwide, analysts expect more than a billion cell phones to be in use in just a few years.

Palm VII By contrast, IDC says that fewer than 10 million people in the United States use Palm Pilots or other handheld computers. By the year 2003, the company predicts that about 89 million "devices"--a category including handhelds, set-top boxes and the popular game consoles--will be sold. That's a telling statistical gap for some analysts who see the balance tipping slowly toward the cell phone companies.

The newest 3Com Palm VII is priced at about $499, while the Motorola Timeport P8167, one of the newest Web-surfing phones, is priced at $300. Both these products are among the highest-end products in their markets.

Few people use wireless Net services in the United States, however. The technology industry is pouring funding and talent into the wireless sector on the assumption that people will adopt the wireless Net over the next few years. Wireless Web proponents point to strong demand in Europe and Japan. But in the United States, they're still working largely on faith.

The most advanced Web and wireless companies aren't waiting for the market to develop. The big portal services such as Yahoo and America Online already have developed personal information services that fill much of the niche occupied by Palm and other organizers, and are making them available over wireless phones.

Wireless takes center stage These companies are also playing both sides of the fence, as evidenced by Yahoo's move to populate Palm devices with its technology this week.

Alternatively, unified messaging company Onebox--recently "="" rel="">purchased by Phone.com--unveiled a version of its service that connects voice mail, email, address books and calendar features to the live calling features of wireless phones. Phone.com already has relationships with most of the largest wireless carriers in the world, and hopes to make this set of features a basic component of wireless services from the likes of Sprint and British Telecommunications.

"This gives us what we need to allow the carriers to take on the Palm," said Vinod Valloppillil, wireless product manager for Onebox.

Wireless Web access also forms the core of new strategies at Palm and rival Handspring, and executives at both companies say it is much easier to read documents or actual Web pages using their systems.

The mobile phone manufacturers are doing their own part in an attempt to wrap voice communications and the Net together, trying to please both sides of the market. Several of the biggest companies have created devices that are half phone, half Palm-style organizer.

Qualcomm's pdQ and the Nokia 9000 currently lead this market. Nokia and Motorola, among others, have licensed the Palm operating system for new crossover devices, giving that handheld company a foothold in the cell phone world.

The two-in-one phones haven't sold particularly well, however, and analysts haven't been impressed.

"There's a reason that approach hasn't appealed to consumers," House said. "It looks like you smacked two things together, and you're holding it together with a rubber band."

Will consumers ultimately choose sides and pick either the Palm organizer or the cell phone? Most say it's not that simple. Analysts expect many people to keep one of each, using the organizer for data-heavy applications and the phone when they need to talk.

"I think it's a mistake to think that end users will want a device that does everything for them," said Jane Zweig, executive vice president at Herschel Shosteck Associates, a wireless consulting firm. "I'm not sure people are willing to trade the small size of a phone for that much extra screen space."

But for the many people who will balk at having two devices that offer essentially the same set of features, the manufacturers are creating a range of devices that will fall more squarely into the phone or organizer category, without the awkwardness of trying to be both. Customers will simply select the one that best fits their needs for voice or mobile Web services, the companies hope.

"There's not going to be just one way of doing this," said Alan Kessler, chief operating officer for platform and product issues for Palm. "It's not going to be one or the other."