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Palm to use alternative expansion slot format

The handheld device announces support for an expansion card technology incompatible with those used by Handspring and Sony.

NEW YORK--Palm risked alienating two of its leading partners today when it announced support for an expansion card format incompatible with those used by Handspring and Sony.

Palm said in a statement at the PC Expo trade show that it will design and market branded devices featuring the Secure Digital (SD) slot, established by SanDisk, Toshiba and Matsushita. This technology for offering add-ons such as MP3 players or additional storage competes directly with similar proprietary technology from Handspring and especially Sony, both of which license the Palm operating system.

The device maker will work SD technology into its operating system and plans to release devices with SD slots by 2001.

"Over time, we see creating a new generation of consumer devices that can move data between those devices," said John Cooke, senior director of product marketing for Palm. "There will be a whole new generation of applications."

Sony, with its Memory Stick technology aimed at the same digital devices, camcorders and PCs as Matsushita's SD, has been locked in a public battle with the SD consortium, which includes 90 member companies. Palm has joined the consortium and will co-chair a steering committee, the company said. The Memory Stick group, on the other hand, counts about 58 member companies.

Handspring has developed its own proprietary Springboard expansion slot, which is designed to allow third parties to manufacture software and hardware add-ons. GPS systems, wireless modems and digital cameras are among such features that can then be attached to the Handspring Visor without drawing from the battery of the device itself.

"We expect more platforms for expansion to emerge over time--especially with the success of Springboard in the development community--but few, if any, like the Springboard slot that are designed from the ground up for enabling a very broad range of plug-and-play capabilities," said Allen Bush, a spokesman for Handspring. "We applaud all efforts in the industry to raise awareness of expandability as a key benefit of owning a handheld computer."

For its part, Palm says the decision to integrate SD support into the operating system and to release devices with SD slots, rather than with Sony's Memory Stick or Handspring's Springboard technology, reflects the advantages of SD rather than a blow to its partners' efforts.

"It's unique among form factors," said Cooke, highlighting the security SD offers and the advantages gained from its small size. An SD card is about the size of a postage stamp, he said. Handspring has "serious limitations because of the size of the Springboard device," he added.

But the move also underscores the conflicts inherent in Palm's evolving strategy, which is predicated on balancing its software licensing business with its hardware sales.

Since its initial public offering in February, Palm executives have publicly stated that the company, which has dominated the handheld market, will move away from sole reliance on hardware revenues to include licensing fees and profits from wireless Internet services. To that end, Palm has signed up a variety of high-profile licensees, including Sony, Nokia and Handspring, which was launched by Palm co-founders Donna Dubinsky and Jeff Hawkins.

But the relationships have brought new competition to Palm's hardware business, where the company in the past has easily fended off attempts from Microsoft's foundering Pocket PC handhelds. Palm has held more than 70 percent of the market for the past two years, according to International Data Corp.

But that control over the market may be fading. So far this year, Handspring entered the retail market and quickly accounted for 25 percent of all retail PDA sales in May, according to NPD Intelect. Sony, meanwhile, is expected to launch its own much-anticipated device sometime this fall.

Cooke denies these new competitive forces played a hand in Palm's decision to support a technology that rivals Handspring's and Sony's.

"I can't say that I never think about them," he said. "Ultimately, my job is what's the best thing for the customers. I look at all the options."