The deal is significant for both of them. It lets Palm offer a simpler way for owners of its older handhelds to get online. And it allows Sprint to speed its transition from a traditional mobile phone company into a provider of Internet access for all types of mobile devices.
Palm owners will be able to tap Sprint's wireless network in three ways under the plan.
By the spring, Palm III and Palm V owners will be able to buy a co-branded wireless adapter to connect their handhelds to a Sprint cell phone. Later this year, they will be able to purchase a small modem that slides onto the Palm and connects directly to Sprint's network. Finally, Sprint will offer phones with a built-in Palm operating system.
"This announcement is great news for Palm because, in terms of digital wireless coverage, Sprint is it," IDC analyst Kevin Burden said.
For Sprint, the deal gives the company a piece of a new, fast-growing segment of the mobile data market. Sprint has spent a year and considerable marketing muscle touting its cell phones as Internet-access devices, with only limited success. The Palm deal could effectively jump-start that effort, analysts said.
"Sprint is going to have a great portfolio of devices," said Iain Gillott, chief executive of iGillottResearch, a wireless consulting firm. "You can choose the device that suits your lifestyle. It's not just, if you want Internet, here's the two phones you can use."
Sprint PCS teams with Palm
Scott Relf, senior VP, Sprint PCS
In November, the company announced the mobile Internet kit as well as MyPalm, a portal that brings email, Web surfing and other services to Palm devices with wireless access. As part of the Sprint deal, the two companies will offer a new, co-branded version of MyPalm that can be used by owners of Palm OS-based phones such as the Kyocera Smartphone, which combines a cell phone and Palm handheld.
While the deal announced Thursday involves only the so-called smart phones and Palm-brand handhelds, Palm chief executive Carl Yankowski said on a conference call that there will be opportunities for other Palm licensees such as Handspring and Sony to take part if they choose to.
The deal is also nonexclusive, leaving Palm free to work with other wireless carriers, and allows Sprint to potentially work with other handheld makers, such as those that use Microsoft's Pocket PC operating system. Yankowski said Palm is already in discussions with European carriers to offer similar services there.
Providing wireless access has been a growing focus for Palm, which is looking to get more revenue from sources other than device sales. In its most recent quarter, Palm brought in 97 percent of its revenue from selling handhelds and only a small fraction of it coming from its Internet content and access business.
Palm and Sprint said the financial details of the new deal are not fully worked out, although there will be revenue sharing on both sides. In an interview, Yankowksi said his company stands to get a cut from the monthly bill of every new Sprint customer who uses a Palm handheld on Sprint's network, while Sprint could get a slice of any revenue generated by the co-branded portal site.
The real benefit, both companies say, is the potential to add to their total number of customers. The companies could also help sell each other's products and services, though the details there also have yet to be finalized.
Thursday's deal also adds a new puzzle piece to a Sprint strategy that has gained ground quickly over the past few months.
All of the major wireless carriers are looking toward the next generation of services, in which fast network connections will support multimedia content and other new kinds of wireless Net applications. But few have gone beyond announcing that they will ultimately support faster networks, with most offering only vague promises of the types of applications that customers will be able to use.
By contrast, Sprint has begun offering a few of the devices and services that will form the foundation of its strategy. The company offers a software-based compression service that speeds connections nearly to the point of an ordinary dial-up Internet service provider, boosting the efficiency of text-based Web browsing on today's mobile phones.
Last fall, Sprint also introduced a combination phone and MP3 music player that customers can use to store songs downloaded from the Net. The company doesn't yet encourage subscribers to stream the music directly from an online storage service but states this is in its plans once the next generation of fast connections falls into place.
By offering Internet access to handheld computers, Sprint is looking to evolve from a primarily voice network for cell phones to one that supports voice and data on a variety of devices. Analysts say most of the mobile phone networks will eventually move in this direction, but they say Sprint has moved more quickly than its rivals.
"We recognize that our customers will have different preferences as to which device they want to use," said Charles Levine, chief operating officer of Sprint PCS. "Sprint is taking mobile data to a new level."
Staff writer Richard Shim contributed to this report.