Palm: What PDA problem?

To end confusion over the Palm brand, PalmOne is spending $30 million to acquire the Palm name--a brand that the company says has tremendous equity around the world.

It will now center its marketing efforts on Palm, which has become a household name among mobile warriors since 1996. The company will also remain committed to its traditional PDA business despite a general industry move toward converged devices such as smart phones, says Paul Blinkhorn, Palm's Asia-Pacific vice president.

Blinkhorn spoke with ZDNet Asia during the company's developer conference in Singapore last week, and talked about the reasons for the recent name change, Palm's commitment to the PDA market and how it is overcoming its competitors in the smart-phone space.

Q: What is the rationale for the recent change of names from PalmOne to Palm?
Blinkhorn: In October 2003, the then-Palm organization acquired handheld maker Handspring. At that time, the decision was to split (Palm) into two companies: PalmOne, which would be responsible for the development of the hardware platform, and PalmSource, which would be responsible for the operating system, development and its licensing.

We wanted to be sure that there was no ambiguity over who Palm is.

The two companies tried to be separate entities, with separate stock tickers. PalmOne then became convinced--from a branding perspective--that it would be a very good thing to have outright ownership of the Palm brand, which has tremendous brand equity around the world. The desire was to concentrate all marketing and promotional efforts around the Palm brand.

The negotiation that commenced between PalmOne and PalmSource resulted in PalmOne acquiring the Palm brand. Under this agreement, we became Palm, and PalmSource has a period of time to change their name to something other than Palm.

At the same time, we extended our software licensing agreement with PalmSource through 2009 to ensure we continue to develop products under this great (Palm) operating system.

So it's purely from a marketing standpoint, to leverage on the Palm brand?
Blinkhorn: Absolutely. It's a very strong brand, and we wanted to be sure that there was no ambiguity over who Palm is.

And the $30 million spent on acquiring the Palm brand was well worth it?
Blinkhorn: Absolutely. No question.

Palm seems to be focusing most of its resources on smart phones and allowing its PDA business to languish somewhat. Is this a fair assessment?
Blinkhorn: I hold a very different point of view. Firstly, the PDA market is still a very important market for Palm. Yes, the market is flat and has declined, and the analysts are saying that it looks to be flat all the way to 2008. But in Europe, the PDA market is growing. The reason for that is because of GPS (Global Positioning System).

We are continuing to innovate in the PDA category because we think it's very important. We are not allowing the market to languish. We are continuing to spend research and development dollars on bringing new PDA products to market.

For example, there's a whole new subcategory of PDA users which we call the mobile manager. Our product in this category is called LifeDrive, which we introduced in May this year. This is the first PDA with a 4GB hard drive, which enables you to have all the functionalities of a PDA, plus the capabilities to store vast amounts of documents, music and photos. So we are not in any way abandoning the PDA market.

In Europe, the PDA market is growing. The reason for that is because of GPS.

On the smart-phone front, the reality of converged devices is exploding with fantastic growth, and we are investing in this area as well. Part of the rationale for the Handspring transaction in 2003 was the acquisition of the company's Treo technology, which catapulted the then-PalmOne into this important market.

So we recognize both markets and what we are doing is to provide mobile solutions to our customers, whether they are traditional PDA-style products or the converged device, smart-phone category.

The smart-phone market is close to doubling in size each year, and this has begun to affect PDA shipments negatively. Do you see that as an industry trend?
Blinkhorn: There's no doubt there'll be a group of people who do not wish to carry two devices. And that's the whole reason why the converged device category is emerging.

Year on year, we saw the converged-device category in Asia grow by about 225 percent, so it's really taking off. Will that impact PDA sales? Yes, it will. Because without that phenomenon, you would see PDA sales continue to grow. As it is, it's looking like a flat market position for PDAs and an explosion in the converged-device category.

For us, does it matter? Probably not, because what we want to do is to provide mobile solutions regardless of what people want. Take the bottom end of our handheld range, the Zire. It's at a very different price point compared to the Treo 650. Not everybody wants

a converged device. I know lots of people who still like a two-piece solution. They want a very small mobile phone with Bluetooth or Wi-Fi capabilities, as well as a PDA.

How are you responding to the competition from Research In Motion BlackBerry devices?
Blinkhorn: RIM is not a PDA provider. It is providing a highly specialized e-mail service and doing very well at it on a worldwide basis. We are not competing directly with RIM, are not on the same ground that they are competing with. To compare the Treo 650 with the BlackBerry--ours is a full-function PDA with the Palm OS and a legendary user interface. It also has the ability to handle Microsoft files. Then, we gave it phone capabilities, added a camera, SDIO (secure digital input/output) card expansion, and the ability to play your MP3 files.

On top of that, we are not going to give you a proprietary e-mail solution, but rather, here is a whole range of e-mail providers that we will support on this platform. We are very open and nonproprietary with respect to that. The one we've been most successful with in the United States is a company called Good Technology, which provides wireless push e-mail solutions. It's a very different business model compared to RIM.

Are we competing in the same space? Absolutely, but we are competing with a very different value proposition.

Your CEO, Ed Colligan, did not confirm or deny plans about selling Palm devices that could run on Linux or the Windows Mobile platform. Will we see Windows or Linux-based devices soon?
Blinkhorn: We are not able to comment on future products, but we can tell you this--today, we believe that the best OS (operating system) for customers is the Palm OS. Why? If you compare us with any other OS, there is no comparison--this is the most intuitive and easy-to-use OS available, and we think this is the right product for us now.

Does that mean that we do not look at other OSes? Of course you look at what's around and available. On Linux, PalmSource has openly stated that it will port the (Palm) kernel to Linux. Whatever the name of that product is, PalmSource has clearly indicated that it will move to Linux. Its acquisition of MobileSoft in China is part of that strategy.

What about Microsoft? A move to Windows, at least, could help Palm sell more devices to large businesses, many of which use Microsoft software.
Blinkhorn: When we talk about our association with Microsoft, it's probably a little-known fact that we handle Microsoft applications extremely well. So today, under the Palm OS, we can handle Word, Excel and PowerPoint files. It's not as if you can't embrace the Windows world.

And in the e-mail environment today, I can easily connect this device to Exchange ActiveSync. Under Microsoft Exchange Server 2003, Exchange ActiveSync is there and we support it absolutely. The announcement of Windows Mobile version 5.0 further enhances the Exchange ActiveSync capabilities--it adds push e-mail for a start. In a way, we are addressing that part of the world already, and this is very important to the enterprise.

Enterprise customers are very interested in the fact that we can support Microsoft applications, and that we can connect to the Outlook environment through Exchange ActiveSync.

To the core of your question, we will appeal to many more customers if we embrace Palm, Windows, Linux, Symbian and everything else, but you can't support everything.

We've put enormous effort behind making the Palm OS the most intuitive interface available. We've got tens of thousands of software developers out there producing wonderful applications.

We also have Prudential Insurance in Malaysia, which has deployed thousands of Treo 600s and Treo 650s, to their sales force. Sitting on top of their wireless e-mail solution is a specially developed application that enables their sales force to work with customers in the field. This is a real example of the power of the Palm OS at work.