Sony, Palm to team on handhelds

Sony said it will create a new line of handheld devices that go beyond the organizer functions associated with today's Palm devices. The new handhelds will have audio-visual capabilities and will focus on providing wireless communications, Sony said.

The deal between Sony and Palm Computing, a division of 3Com, comes on the same day that Microsoft announced plans to expand connectivity for handheld devices based on its scaled-down Windows CE operating system. That move is aimed at closing the still-wide gap between adoption of CE and Palm devices; Palm accounts for 75 percent of the market, according to research from International Data Corporation.

But the Sony deal is likely to help bolster Palm's position even more in the handheld arena.

Microsoft and Sony have a history of being fair-weather friends, sometimes ending up on the same side and sometimes on opposite sides on an array of fronts. Microsoft recently has been considering a move into the video game console market, in which it would compete with Sony's PlayStation. Sony earlier this year said it would supply new television set-top boxes to Cablevision Systems, pitting it against Microsoft's WebTV.

On the flip side, in May the two giants said they would collaborate to promote software, music, and video products on the Web.

"A lot of the home commerce now conducted over the Web could well move to the TV set very quickly," said Jonathan Goldsmith, a consultant with PricewaterhouseCoopers. "Microsoft has got to be extremely worried that they not get locked out of the player and set-top market."

Goldsmith said that Sony's forthcoming PlayStation 2, which is due out next year, could be a winner in the set-top and console market because of the horsepower Sony has put into the device.

Going after Game Boy?
The Palm deal may aid Sony in its quest to catch up with Nintendo in the handheld game market. Although Sony dominates the game console market, Nintendo's Game Boy is still king of the handheld game devices, having sold more than 80 million units since its introduction.

While not commenting on Sony's plans specifically, David Weilmuenster, director of platform strategy and planning for Palm Computing, said photography and other imaging capabilities could be used to complement entertainment applications as well as the basic organizer functions of the Palm.

Nintendo has already announced it is developing a new version of its Game Boy that will let users go online via a cellular phone or similar wireless connection to play multiplayer games, participate in online chats, download software, and retrieve email. Among other planned features are a new digital camera that will allow users to see the faces of their online opponents.

The Sony deal may encourage investors to pile onto Palm's stock if all goes well with 3Com's plans to issue shares of Palm in an initial public offering sometime early next year.

Last month, Palm said it was working with the world's largest cell phone maker, Nokia, to use its interface and applications with the Symbian platform. Symbian--a joint venture between U.K. firm Psion, Sweden's Ericsson, Finland's Nokia, U.S. firm Motorola and Japan's Matsushita--is developing a new breed of smart cell phones and palm-top computers with Internet access. Here, too, Palm is seen as having made significant inroads against Microsoft, which is trying to get phone makers to use a version of its Windows CE.

Sony and Palm will work together on a new version of the Palm operating system that enables Palm-based devices to take advantage of Sony's Memory Stick technology, as well as other unnamed Sony technologies.

Memory Stick is essentially a portable, re-recordable storage media that can save digital photos, data, music or other information. What makes the technology different from other portable storage devices is size: A single purple stick, which can store 8 to 64 megabytes of information, measures around 1.5 inches long and is about as thick as a piece of gum.

Sony is licensing the technology for use in phones, its own digital Walkman-music devices, TV set-top boxes, TV remotes, the Aibo robotic dog and electronic books, in addition to computers. There are now more than 20 licensees of the Memory Stick technology.