Handspring took its first steps earlier this year, partnering with distribution giant Ingram Micro in March to begin signing up resellers that focus on businesses. On Wednesday, Handspring went a step further and announced a deal with Aether Systems, whose technology allows mobile devices to access corporate data.
"Business customers want secure data. That's not Handspring's bag. We do hardware," said Lee Epting, one of the early few who left Palm to establish Handspring. She now heads Handspring's business sales effort.
Mountain View, Calif.-based Handspring, which started selling its first Visor device two years ago, quickly garnered the No. 2 spot in the U.S. retail market for handhelds by combining the Palm operating system with brightly colored cases and its Springboard expansion slot. Since then, the company has added new models with features such as faster chips, more memory and color screens, but its efforts have remained largely aimed at individual buyers.
Cracking the coporate market could be important for Handspring which has suffered from excess inventory and a brutal price competition with Palm in the consumer market.
The slide in sales has contributed to a dramatic decline in Handspring's stock in recent months, with the shares now trading at about $2, down from more than $45 in January.
Gartner analyst Todd Kort says that for Handspring to have a chance in the corporate market, it needs to offer devices that use both Palm's operating system and Microsoft's Pocket PC OS.
"Going through Aether is a recognition that (Handspring) needs a stronger partner," Gartner analyst Ken Dulaney said. "Handspring has an uphill battle because they never have established themselves in the enterprise, and the (broader) Palm economy is somewhat waning in the enterprise."
Working with Owings Mills, Md.-based Aether could aid Handspring in scaling that hill. Aether's technology focuses on helping businesses use mobile devices to access important corporate data, as well as sales software and other key applications. Aether sells both mobile devices and server-based software.
But Handspring faces a rough road as it tries to win corporate acceptance. A sleek and colorful design may attract consumers, but most companies don't consider such niceties.
"We are trying to emphasize products like Compaq's iPaq, which use Microsoft's OS for handhelds," said Frank MacNeil, the director of information technology at Pentucket Medical Associates, a practice based in the Northeast with three office locations and about 65 physicians. "We are hoping that the iPac will be more robust for our needs; we want to move toward getting more database access and think there will also be more third-party products for it."
Despite the higher cost of an iPac, MacNeil said it will be easier to implement with the practice's current software setup.
"We want our staff to be able to access their Outlook e-mail with constant updates through the handhelds," he said, referring to Microsoft's ubiquitous e-mail application. "The iPaq is more in line with what they are used to seeing with their regular Outlook, so there will be less of a learning curve involved."
Handspring's corporate efforts are still in their infancy. The company's team aimed specifically at corporate customers consists of six workers, including Epting, who was shifted two months ago from developer relations to become director of enterprise sales.
"As we start to see some wins, I think we can justify growing that organization," she said.
Although Handspring doesn't detail its sales numbers to businesses, Epting said corporations already buy millions of dollars worth of Visors. Handspring has signed up roughly 900 resellers in North America through the Ingram deal, she said. The handheld maker has another 200 or so resellers in Canada through a similar arrangement with Merisel.
However, Epting asserted, most handhelds used at corporations are still purchased by individuals. And even when companies buy Visors in bulk, they typically buy just the basic handhelds, without the custom software needed to turn the devices into a mainstay of corporate computing. Deals like the one with Aether are aimed at giving businesses a more compelling reason to buy Visors.
Although Handspring is intent on creating handhelds that businesses want, the company's strategy focuses on partnering to offer and sell other items that corporations need, such as software for secure access to data--instead of trying to do everything itself.
"I don't plan to hire 40 salespeople," Epting said. "I plan to use my channels."
Palm is also relying more on partnerships to approach the corporate market since abandoning its effort to buy Extended Systems in May.
Taking businesses wireless
Handspring's deal with Aether provides one way for companies to gain wireless access to some types of corporate data, but Epting said to expect other partnership announcements soon.
Epting hopes to make a compelling case for businesses to go with Handspring so that, by the time the company announces wireless handhelds later this year, businesses will have the tools they need to start using them.
Last month, the company received regulatory approval for two such wireless devices, both of which use the GSM (Global System for Mobile Communications) network and are capable of making phone calls and receiving wireless data.
Such devices build on the company's initial wireless effort, the VisorPhone add-on, which Epting admits failed to live up to expectations.
"We can admit the VisorPhone sales have been slow," Epting said, adding that "the software work we did has been very valuable."
However, Dulaney asserts that Handspring's biggest problem could be that the Palm OS loses out to Pocket PC as the operating system of choice among large companies.
"I'm afraid Microsoft is on a roll here," he said.
Although many companies initially standardized around Palm, Dulaney said, some are reevaluating that decision amid increased competition from Microsoft. Rather than support multiple standards, Dulaney said, many companies may opt to support just Microsoft.
If Handspring is serious about the business market, Dulaney added, it may want to offer devices that use both Palm's OS and Pocket PC--something that will become easier when Palm moves to the same ARM-based chips used in Pocket PC-based devices.
"The biggest thing Handspring has to think about is whether they stick with the Palm platform," Dulaney said.
News.com's Sandeep Junnarkar contributed to this report.