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New low-end model kicks off Palm's product makeover

Sources say the handheld maker is on the verge of unveiling a beefed-up version of its entry-level m100--the first in a string of new products this year.

Palm is on the verge of announcing a beefed-up version of its entry-level m100, sources say, as the company tries to maintain its dominance of the handheld market.

The m105 is the first in what will be a string of new products designed to make Palm's handhelds more powerful, better suited for the corporate market and more competitive with wireless rivals such as Research in Motion's BlackBerry e-mail pager.

The m105 will sell for around $200 and comes with 8MB of memory, according to one retailer. Unlike the $149 m100, which has 2MB of memory, the new model will include a serial cradle rather than a cable for syncing to a PC. Like that of the m100, the operating system of the Palm m105 cannot be upgraded.

Sources familiar with the company's plans say the m105's launch is imminent. A Palm representative declined to comment on the m105 but said Tuesday that the company has stopped production of the Palm IIIxe. The m105 will replace the Palm IIIxe.

The move starts what is expected to be a busy year for Palm. The company is trying to keep pace with handhelds that use Microsoft's rival Pocket PC operating system and with its own licensees, such as Handspring. Although Palm still controls more than 60 percent of the market, Handspring has grabbed a good chunk of the low-end market and Pocket PC-based handhelds saw an uptick in market share last month, according to PC Data.

"A lot of share has been gained by Handspring at the low end," said Paul Sagawa, an analyst at Sanford C. Bernstein. "Providing more options for entry-level devices is a good thing."

Next on Palm's list is a product likely to be dubbed the m505, which improves on the Palm V by adding a postage stamp-sized expansion slot and the option of a 16-bit color screen. The unit, which is said to be nearly as thin as the Palm V, is also expected to feature a more advanced lithium-polymer battery and the next version of the Palm operating system, 4.0.

Palm has previously said that models with the new Secure Digital expansion slot will ship in the spring. The expansion slot and color screen will help Palm better compete with its own licensee Handspring. Handspring's Visor Prism already features a 16-bit color screen, and all Handspring models include an expansion slot called the Springboard.

In the second half of the year, Palm is also expected to ship a wireless device with always-on e-mail and access to corporate e-mail servers similar to rival Research in Motion's BlackBerry devices.

Sagawa said the e-mail pager will be Palm's most important new product.

"The thing I'm most interested in is the RIM-killer," Sagawa said. Improving the wireless capabilities of the Palm operating system is critical, he added. "That's where, I think, long-term revenues are going to come from."

Palm also plans this year to ship its first wireless handheld in Japan.

As for the new handheld, the m105 will essentially replace the Palm IIIxe, much like the m100 replaced the Palm IIIe last year.

Although the IIIxe is still available at retailers, the unit is no longer listed on Palm's online store.

"We will not be making (more of) them after they are sold," a Palm representative said.