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Is Palm using sleight of hand with its color display?

Palm Computing is tantalizing its developer community with news that one of its licensees will soon be showing the first Palm-based color device.

Palm Computing is tantalizing its developer community with news that one of its licensees will soon be showing the first Palm-based color device--but sources say the device will actually come from much closer to home.

Palm Computing sent a letter to outside developers this week announcing the Color Device Developer Connection event on Feb. 2, which will showcase the first device running on the Palm operating system with a color display.

Ostensibly an opportunity for third-party software and hardware developers to play around with the new color-enabled operating system, the letter hints that a Palm licensee will show a device with a color display for the first time.

"In the spring of 2000, one of the hardware manufacturers that makes products based on the Palm OS will release a device with a color display!" the letter states. "This licensee is interested in showing some of the stable, useful, quality, color applications that exist at the time of the product launch."

But rather than a new device from a licensee like Handspring, TRG, or even Sony, as some developers are guessing, sources say the Palm event will actually be the debut of the Palm IIIc, a color device from the soon-to-be-independent 3Com subsidiary itself.

Palm was not available for comment.

The company's coyness is probably due to a combination of factors. Because its spinoff from 3Com and initial public offering are imminent, the company must be careful about hyping future products or plans for fear of the appearance of hyping the IPO itself. In addition, the Palm IIIc, due out in late February, has not yet been officially announced.

Palm has split itself into three separate business units, focusing on the operating system, Internet services like the Palm.net service for the Palm VII wireless device, and the hardware group, whose focus is designing and manufacturing new devices. Internally, the company refers to the hardware group as another licensee of the Palm platform, just like Handspring or Nokia.

Palm's chief rival in the handheld operating system market is Microsoft, whose Windows CE operating system has enabled color devices for over a year. But despite the apparent technical shortcoming, Palm-based devices have steamrolled Windows CE in terms of market share and retail sales, according to almost every recent study. Currently, Palm holds about 75 percent of the market.

As reported earlier, Palm will release the IIIc, along with the IIIxe, the successor to the IIIx, at the end of February. Analysts have been somewhat apathetic about the prospect of the color Palm, though, noting that the operating system is not written to support the range of multimedia applications--including digital video and images--that Windows CE currently offers.

In explaining the delays in offering a Palm with color display, the company has long cited the technical constraints that color displays pose, chiefly battery drains, bulky size and cost.

But developers, or at least those willing to sign non-disclosure agreements, will be able to see the IIIc at the event on Feb. 2. The Palm IPO is also targeted for February.