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PalmSource to unveil smart-phone software

Operating system might help make up for a rough quarter and Microsoft nipping at the company's heels.

PalmSource will go after the emerging smart-phone market with its latest operating system, looking to grow beyond its core handheld business.

As expected, the market-share leader in handheld operating systems plans to announce on Tuesday the Cobalt 6.1, its first product specifically aimed at smart phones, at a developer conference in Munich. Last week, the company disappointed Wall Street with a cloudy quarterly outlook, citing uncertainty because of the withdrawal of Sony, a significant licensee, from the handheld field in all markets except in Japan.

To assuage concerns about its future, the company is targeting the smart-phone market. Cobalt, previously code-named Sahara, has been in development for about a year. Among its features are telephony capabilities, a native e-mail application, a Web browser and integrated Wi-Fi and Bluetooth wireless features. It also adds improved security features and enhanced capacity to open several programs simultaneously.

"Our competitors are throwing a bunch of technology out there and trying to sell a bag of features," said Michael Mace, chief competitive officer at PalmSource. "We're asking 'What do the users really need?' just like we did with the original handhelds?We're fully modernized and fully wireless."

Mace added that if cellular carriers and manufacturers test the operating system and it proves to be compatible with their plans, phones using Cobalt will come out in the first half of next year. There are about 10 different phones in development using the new software.

Despite PalmSource's current lead position in the handheld market, analysts predict that rival Microsoft will catch up and surpass the company in the next few years. The Palm OS was used in 51.7 percent of handhelds shipped worldwide in 2003, while Microsoft's operating system was in 38.3 percent of devices. IDC says Microsoft should take over the top spot at the end of this year, with 45.9 percent of the market, compared to 45.1 percent for the Palm OS, and grab a 51 percent share by 2006.

About 35 million devices have been sold running the Palm OS. The company is looking for even bigger numbers by tapping into the mobile phone market, where it currently holds a leading position thanks to devices such as its popular Treo 600.

On Monday, PalmSource announced that GSPDA, Inventec Appliances and Portable Innovation Technology Limited (PiTech) will license the new operating system.