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3Com not sheepish about cloning plans

The company's Palm Computing division is expanding its plans to get other manufacturers to market PalmPilot devices and even make clones.

3Com is hoping for strength in numbers as it seeks outside partners to make PalmPilot clones.

3Com's Palm Computing division is aggressively expanding its licensing plans to get other manufacturers to market PalmPilot devices and even Palm clones, according to company executives, its latest move to strengthen its defenses against an onslaught of Microsoft's palm-size PCs.

Palm will shortly sign agreements with clone manufacturers, according to company executives speaking at an industry trade show in San Diego. Palm's president, Robin Abrams, made the comments in a panel discussion at the MobileDemo show, joined by the company's vice president Mark Bercow and other executives.

Abrams is expanding upon former president Janice Roberts' strategy of partnering other vendors to expand Palm's reach. Under Roberts, Palm signed licensing deals with cell phone companies such as Qualcomm and pager companies, which used the OS in devices that were different in design than the Palm. IBM started to market a Palm device under its own brand name, although Palm manufactured it.

Going forward, this strategy will be expanded to include consumer electronics manufacturers, even those who already make devices based on Microsoft's Windows CE operating system like Casio and Philips, Abrams said. These companies could conceivably make clones of the Palm without active participation of the parent company, which would be a first.

The shift in strategy is partly a result of the company's success in establishing its market share, and partly a recognition of the growing threat of Microsoft in the market.

"This is about the future of the platform," said a Palm spokesman, who noted that in the early stages of the company, cloning did not make strategic sense. "We're coming into a stage where we're going to be more aggressive."

Palm will likely announce manufacturing and licensing partners by year's end, according to the company.

Palm, though still the undisputed leader in the handheld market, is projected to lose some of its ground to Windows CE devices over the next five years. Though Palm is generally regarded as possessing a more evolved operating system, Microsoft has been rapidly building in support for features like color displays and longer battery life. Moreover, the sheer number of manufacturing partners will chip away at Palm's market share.

Palm devices currently hold about 72 percent of the handheld market, according to market research firm International Data Corporation. But Microsoft and its battalion of manufacturing partners are expected to gain 55 percent of the market by 2002, according to IDC.

The company concedes that its decision to market clones may cannibalize some of its own sales, but the company believes that more manufacturers will result in growth of the Palm platform, which includes the hardware and operating system, a spokesman said.

"Now that we're entering a phase where there's going to be millions of units sold per year, we can be more broad," in our licensing strategy, the spokesman said.

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