Palm hopes to get a grip on business market

In his keynote at the PalmSource Developer's conference, Palm president Alan Kessler said his company has achieved almost 70 percent global market share, largely by appealing to mobile workers who purchased PalmPilots individually.

Now Palm is gambling that those handheld users, which include chief executives and information managers, will help convince large corporate buyers to purchase Palm-branded devices, server software, and third-party services to create a networked workforce.

It's a big gamble, but neither Kessler nor other executives addressed the company's challenges in the new market, namely: How will Palm convince corporations to invest the time and expense of purchasing and deploying handheld devices and their back-end counterparts?

Kessler, 3Com chief executive Eric Benhamou, Cisco Systems CEO John Chambers, and Palm vice president of platform services Mark Bercow addressed the crowd of 2,000 developers, and the emphasis was emphatically on the business market, a potentially huge opportunity.

Palm's imminent spinoff from 3Com complicates the picture, observers say, because Palm will lack 3Com's expertise and sales experience with large corporate customers. Palm's executives also conceded that selling to large companies is difficult because of the conservative nature of most information technology managers.

IT managers "fear everything," Kessler said, to the crowd's laughter.

Opening the conference, Benhamou also laid out parent company 3Com's plans to spin off Palm as an independent and publicly owned subsidiary.

"The spinoff will dramatically expand your opportunities," Benhamou told the crowd of software and hardware developers, also noting that an independent Palm will benefit from its status as a publicly traded company with freedom to negotiate with a wider range of partners and with more money to cut deals.

By early next year, Palm will complete all the necessary regulatory filings, conduct a "road show," and price its IPO, Benhamou said. In the meantime, the company needs to fill out its management team and board of directors.

Benhamou compared the spinoff to similar moves from HP and AT&T, which created Agilent and Lucent Technologies, respectively.

Taking the stage after Benhamou, Kessler elaborated upon the companies' concept of a "Palm Economy" made up of third-party licensees as well as software and hardware developers. Kessler cited Palm's recent deals with Nokia, TRG, and Handspring as early signs of Palm's momentum.

Kessler cited a recent study by market research firm International Data Corporation predicting that by 2003, there will be 47.1 million mobile workers who will be away from their office nearly 20 percent of the time. These workers, and their employers, are Palm's new target market, he said, adding that the company is not abandoning its commitment to the consumer market.

Yesterday, Palm announced a suite of new products aimed at these new business customers, including an ethernet cradle for high-speed data transfer to PalmPilots, a new Palm HotSync server application to synchronize data between devices and company servers, and expanded service, support, and training for enterprise customers.

Palm's independence from 3Com has already enabled some alliances which would not have been possible before, including Chambers's keynote address. "Many of you may be wondering what I'm doing speaking at my competitor's trade show," he said, referring to 3Com's networking business.

Chambers addressed the growing necessity among businesses and government to embrace the rapid new pace of the "Internet revolution." Leaving the stage periodically to mingle with the audience, Chambers exhorted the crowd to "keep your finger on the pulse of your customers, or you will get left behind," he said, citing Amazon and Dell as examples of Internet-driven companies that decimated the established companies in their respective industries.

"The point I'm making is, it's a networked world," Chambers said. "In short, everything is changing."