The giants in handheld computer software, Palm and Microsoft, will soon get a new competitor: Linux, the free operating system.
The cult software, developed by a global network of developers overseen by Finnish programmer Linus Torvalds, has long been targeted at PCs and corporate-server computers. It's positioned as an inexpensive, reliable alternative to Microsoft's Windows and to versions of the Unix operating system sold by Sun Microsystems and others.
But recently, several electronics makers in the US and abroad have announced that they are creating Palm-like gadgets based on the software. Royal Consumer Business Products, a unit of Italy's Olivetti SpA, has said it will introduce Linux-based handhelds in mid-2001. Electronics maker G.Mate plans to release a Linux-based handheld in South Korea by the end of the year. Earlier this month, Agenda Computing, a unit of Kessel International Holdings, unveiled the Agenda VR3, a Linux-based device that is scheduled to ship in June. And Japanese electronics giant Sharp has said it will launch a Linux-based handheld gadget in the US late this year.
Move over Palm and Microsoft?
These developments seem likely to increase competitive pressures on Palm, which supplies the operating system for more than 75 percent of the handheld computers that are sold in the US, and Microsoft, whose Pocket PC software is used in most of the other handheld devices.
For Palm, in particular, the arrival of a new competitor couldn't come at a worse time. Last month, Palm said it had been hit by the slowing economy and its own troubled transition to a line of new handhelds, compelling it to slash its earnings forecasts and to lay off staff.
Michael Mace, Palm's chief competitive officer, says he began tracking the makers of Linux devices more carefully last year. The Linux machines are "still pretty crude, but so was Palm at one time," he says, adding that Sharp's support for Linux is especially worrisome. "Sharp has really deep pockets," he notes.
Microsoft executives are a bit more dismissive. "From what I've seen of these Linux gadgets, the jury is still out on them," says Ed Suwanjindar, a product manager in Microsoft's mobile devices division.
Linux is an "open source" operating system, meaning that users and computer makers can improve on the programming instructions used to create it. The Linux code is also free and openly available to software developers, so computer makers don't need to pay licensing fees to embed the software in their handhelds. Palm and Microsoft don't disclose their licensing fees. But the brokerage firm Needham & Co. estimates that Palm, which also makes its own hardware, charges between US$5 and US$15 per device that other manufacturers sell--or about 10 percent of the hardware's wholesale price--and Microsoft charges about the same.
