Palm's tale of Treo intrigue

Microsoft, Palm went to surprising lengths to hide the clandestine talks leading to Windows-powered smart phone. Photos: Palm's new Windows phone

Palm CEO Ed Colligan spent several days in Cannes in February 2004 talking up the Treo handheld computing device over its Windows-based competitors. But that same week, away from the massive 3GSM trade show, he was secretly meeting with the enemy.

At a nondescript Comfort Inn a short distance from the main conference center, Colligan and several Palm colleagues held a clandestine gathering with a team from Microsoft that was led by mobile unit head Pieter Knook. The groups took separate cabs to the hotel, met for several hours in a conference room, and then returned to the tech confab as though their rendezvous had never happened.

The secret meeting, to discuss business terms of a possible partnership, paved the way for the developers of the Palm operating system to join up with a company that had once been their fiercest rival.

Now Colligan and his Microsoft counterparts have gone public. On Monday, Colligan and Microsoft Chairman Bill Gates were on a ballroom stage at the far-tonier Palace Hotel in San Francisco to announce plans for a Windows-based Treo.

Rivals' fortunes tied
The combination seemed unthinkable just a few years ago. Palm envisioned itself as a substantial rival to Redmond, threatening to head off its computing dominance as the power of desktop computing shifted to pocket-size devices. But a series of miscues substantially weakened the company, leaving it little choice but to team up with the world's largest software maker. New Treo

Although Palm has pledged to continue using the Palm OS in both handhelds and phones, the company has now significantly tied its fortunes to the rival it once denounced.

In doing so, Palm is making a tough bet. The company is gambling that Microsoft's operating system has advanced far enough to power a decent cell phone, while still having enough rough edges that Palm can carve out a niche by going beyond the standard Windows Mobile software. In doing so, Palm hopes it can avoid the fate of being just another clone cranking out hardware on Microsoft's behalf.

Microsoft, meanwhile, has scored a significant win in its decade-long quest to crack the mobile market. In wooing Palm, Microsoft has brought a one-time rival into its fold and ideally gained a new creative force as it tries to move its PC empire into the burgeoning market for cell phones.

"Palm always did great work, and so we lusted after some of those things that they do well," Gates told reporters at Monday's launch.

The partnership is not totally out of the blue, of course. The two companies offered a glimpse at the detente last year, announcing a pact that allowed Palm OS-based Treos to connect directly with Microsoft's Exchange servers for corporate e-mail and calendar information.

But even as that deal was being announced, Microsoft and Palm were already meeting in secret to plan a much broader alliance. The companies followed their Cannes discussions with a meeting at another trade show in March. During the CTIA cell phone trade show in New Orleans, executives from the two companies met at Arnaud's, a well-known Creole restaurant in the French Quarter.

The two companies had booked a private room for the gathering. However, executives arrived and found their table was not yet ready, so they divided into their separate camps and headed to opposite ends of the 20-foot-long bar, pretending not to notice one another.

Code name Hendrix
Finally seated some time later, executives from the two companies, as they sipped bisque and ate Creole bruschetta, hashed out their marketing plans over a four-hour dinner one described as a "17-course extravaganza." The execs have fond memories of that meal, which sealed their partnership.
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Palm CEO Ed Colligan, Microsoft Chairman Bill Gates and Verizon Wireless CEO Denny Strigl

Following Hurricane Katrina, "we're wondering if that restaurant is still there," said Palm senior vice president Ken Wirt. (The 87-year old restaurant issued a press release on Monday saying that it is still assessing damage, but plans to reopen "as quickly as possible.")

Even when not trying to hide in the middle of the entire cell phone industry in New Orleans, the two companies went to great lengths to keep their relationship a secret. In phone calls and e-mails they referred to one another only by code names. Microsoft was "Woodstock," Palm was "Purple Haze." The Windows-based Treo itself was called "Hendrix." Anyone who forgot to use the psychedelic pseudonyms was fined.

When attending a meeting at Palm's offices in Silicon Valley, Microsoft workers were reluctant to offer up their affiliation to a security guard who was printing visitors' badges. After failing to convince the guard, the delegation spent an awkward few minutes

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