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Are PDAs the wave of the future?

Motorola's buyout of Starfish Software signals the growing convergence of wireless phones, pagers, and personal digital assistants into palm-sized devices.

Motorola's buyout of Starfish Software signals the growing convergence of wireless phones, pagers, and personal digital assistants into palm-sized devices that do nearly everything but make coffee.

As corporate demand for these devices increases, Motorola hopes Starfish's TrueSynch technology--which synchronizes information on PCs with that on PDAs--will allow more functionality for the company's wireless products, including pagers and mobile phones.

This is not Motorola's first foray into the PDA field. Back in the early days of Apple Computer's Newton, Motorola built a version of the handheld device with built-in wireless capabilities. Like the Newton, Motorola's product was a marketing flop. Among other concerns, consumers have been leery of the prices charged for such devices.

Motorola also had its eye on the PDA market last month, when it joined cell phone makers Nokia and Ericsson in buying a large stake in Psion, one of a handful of companies that makes both hardware and software for PDAs.

The alliances are part of a trend toward convergence, in which cell phones are becoming more like PDAs and PDAs are becoming more like pagers. The goal: provide consumers with a phone and a PC wrapped into one.

Other examples include 3Com's PalmPilot and Novatel Wireless' Contact. Both are PDAs that have email and other wireless functions folded into them. Nokia 5000, a mobile phone with a computer screen, is an example of cell phones embracing PDA features.

"The convergence is a very real and happening thing," said Rob Enderle, an analyst with Giga Information Group. "Part of what makes these devices interesting is their ability to link up with the desktop machine."

The trend hasn't been lost on marketers. Semico Research no longer refers to digital assistants and organizers as PDAs, but rather as "handheld intelligent appliances."

Motorola's buyout of Starfish is expected to be completed by late September or early October. The company has alluded to a new generation of wireless communication products that easily exchange data with other handheld devices, laptops, desktop PCs, and the Internet.

The merger could be seen as a direct threat to 3Com's Palm Computing division, as well as to other makers of handheld devices.

Palm Computing already is in the midst of a transition. Earlier this month, its founder, Jeff Hawkins, as well as its vice president and general manager, stepped down to start a new PDA company.

Palm Computing is still the leader in the fast-growing handheld market, where it had 63 percent of the standard handheld market last year, up from nearly 52 percent in 1996, according to Dataquest, GartnerGroup's research arm. Hewlett-Packard was the No. 2 supplier in the handheld market last year, with 15 percent market share.

A new study by research firm Semico anticipates sales of handhelds, palm-top computers, and smart phones to reach $7.5 billion by 2003. But some analysts say that the market is still emerging and that it is hard to pinpoint which standards or services ultimately will dominate.

Mike McGuire, a senior industry analyst for mobile computing with Dataquest, said the smart phone and enhanced phone markets have yet to prove they will be profitable. He added that many of the companies that jumped into the handheld market early got burned.

"Motorola's history in the handheld market is troubled at best," said Mike McGuire, senior industry analyst for mobile computing with Dataquest, referring to early efforts with the Newton as well as to a separate deal with General Magic. "Many of the same executives who ran some of these less-than-successful ventures are still there. Now, have they learned? Let's hope so."

The TrueSynch technology creates many interesting options for Motorola, but "simply acquiring this technology will not necessarily translate into revenues," McGuire said. TrueSynch is most visible in Rex, the credit card-size electronic Rolodex device made by Franklin Electronic Publishers.

Executives with Palm Computing declined to comment about the Motorola-Starfish merger.