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Handspring beats Palm during first week in stores

The handheld computer start-up surpasses the market leader in retail sales during its first week on store shelves, a milestone as it seeks to build momentum for an IPO.

Handheld computer start-up Handspring had the best-selling handheld model during its first week in stores, a milestone for the company as it seeks to build momentum for an initial public offering.

Handspring began selling its Visor handheld computer in retail stores the second week of April after product shortages and delays to a planned retail expansion. The company previously sold the devices exclusively through its Web site.

For the week of April 15, Handspring had the top-selling personal digital assistant (PDA), with its Visor Deluxe model claiming 26.8 percent of the retail market for PDAs, according PC Data, a Virginia-based market research firm. The Palm IIIe came in second, with 14.6 percent, followed by the Palm IIIxe, with 14.1 percent. The Palm Vx was next, with 10.9 percent, and the entry-level Visor followed, with 10.7 percent of the market.

Although results from one week do not equal a full-blown trend, the sales figures indicate pent-up demand for the Visor.

"It's pretty impressive, considering the market recognition and confidence that Palm has," said Stephen Baker, a PC Data analyst.

The sales figures could also help the company build interest in its coming IPO. Palm raised more than $350 million in its IPO in February and commands about 70 percent of the market for handheld devices, according to International Data Corp.

Handspring filed at the end of March to raise more than $300 million in its stock offering.

Customers may have waited for retail availability of the Visor because of initial problems Handspring suffered with its e-commerce and customer service processes. After its launch, Handspring was overwhelmed with demand and suffered Web site crashes and delayed or lost orders. Analysts say the issues have been solved, but retail availability is still necessary to reach a mainstream audience.

"It's hard to know from the first couple of weeks of sales," Baker said. "People have been waiting for the Handspring for a while."

In April, Handspring began selling the Visor and Visor Deluxe at CompUSA, Best Buy and Staples; it also began selling its Springboard modules, which are designed to upgrade Visors with a variety of cartridges.

The PC Data figures do not include handhelds based on Microsoft's Windows CE operating system, but the rival devices were selling in much lower volumes than Palm-based devices. The revamped Pocket PC, based on Windows CE, was not released until the last few weeks of April, which meant that many retailers were selling only their last few units of the old devices.

Handspring, started by Palm co-founders Donna Dubinsky and Jeff Hawkins, licenses and uses Palm's operating system in its Visors.

Palm began aggressively licensing its operating system last year, signing up high-profile licensees such as Nokia and Sony in addition to Handspring. Palm's strategy has been to wean itself from hardware profits alone and to remake itself into a software provider, company executives previously explained.

Palm would even be willing to give up its share of the hardware market if it meant a robust "Palm Economy"--the company's name for third-party hardware and applications providers developing products for Palm-based devices.

Now Palm may have to put that theory to the test. Handspring is beating Palm in terms of market share by bringing more customers into the market--not only by taking Palm's customers, Baker said.

"Growing the available market for the Palm OS has obvious benefits," Baker said. "If that's their goal, to have lots of Handsprings out there is great, even if Palm hardware may be losing some business."