Round two at Palm
A rejuvenated Silicon Valley star is betting big on smart phones
MILPITAS, CALIF.--The brainiacs who gave the world the PalmPilot, the first useful PDA, and the Treo, the first good smart phone, are in Genious. That's the name of a conference room at PalmOne's headquarters. It's right next to a conference room named "Domitable." Get it? They're in . . . genious. Maybe later they'll be in . . . domitable. Palm staffers grin at the company wit as they show off their newest, coolest device, the Treo 650, launched this week. The way the slim, elegant gadget is packed--with a cellphone, PDA, MP3 player, Web browser, E-mail reader, game player, usable keyboard, and still and video cameras--is definitely ingenious. "Close to 1 billion people have cellphones," says Chairman Eric Benhamou. If PalmOne gets only a small percent of that market share, "the future is huge."
But many investors and analysts have started to wonder if PalmOne's genius is enough to justify that kind of optimism. After all, global sales of stand-alone PDA s--the company's bread and butter--have been falling. And while PalmOne's Treo 600 has quickly become one of the bestselling smart phones, a lot of deep-pocketed competitors including Nokia, Motorola, Sony Ericsson, and BlackBerry maker Research In Motion are getting into the game. Even PalmOne's biggest fans are worried that the company, whose 12 years of soap-opera-like life have made it among the most important and fascinating of Silicon Valley firms, may be facing its toughest challenge yet.
Veteran valley venture capitalist Stewart Alsop is among the worriers. Four months ago, Alsop reluctantly put his beloved Treo 600 in a drawer because he found that his BlackBerry combination E-mail reader and cellphone was enough to see him through his travels. Alsop declares he'll gladly switch back if the Treo 650 does, as PalmOne recently promised, start offering the addictive BlackBerry E-mail service that has earned the RIM device the nickname "CrackBerry." "There is a clearly drawn battle for a great smart phone," says Alsop. Now that the company seems to finally be getting its corporate house in order, "PalmOne really does have the potential" to win the multibillion-dollar smart phone purse, Alsop says.
Unfortunately, the story of PalmOne has been one of eye-popping potential not quite fulfilled. In a world made cynical by the failure of the Apple Newton, it took PalmPilot inventor Jeff Hawkins four years of desperate money raising, while sweating over details as seemingly inconsequential as the strength of battery springs, to finally bring his revolutionary electronic organizer to market in early 1996. Thanks to its elegant Graffiti handwriting-recognition program, slick shirt-pocket-size design, and intuitive contact and calendar software, the PalmPilot was an immediate hit, selling 1 million units in 18 months.
That success attracted investors. Palm's owner, US Robotics, was quickly swallowed up by Benhamou's 3Com, a maker of networking equipment looking to enter the consumer market. But Hawkins and his fellow Palm colleagues, including CEO Donna Dubinsky and marketing guru Ed Colligan, were soon frustrated by 3Com's bureaucracy. So, in the summer of 1998, they quit to form a competitor, Handspring.
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