Since the 1996 release of the PalmPilot 1000, Palm-brand portables are to handheld computers what Kleenex is to facial tissue. But while the general public may still refer to all palm-size organisers as PalmPilots, a battalion of worthy adversaries including Microsoft, Hewlett-Packard, and Compaq have entered the market to challenge Palm's dominance, pushing some market share estimates for Palm hardware as low as 60 percent. Can the five-year-old company fend off increasing competition to maintain its lead? Michael Mace, the company's chief competitive officer, thinks so.
"We've got a lot of exciting stuff going on," says Mace with a broad smile. Long reputed as the most staid of handheld manufacturers, Palm is poised to unleash a torrent of product innovations to rival those of its fiercest competitors. Contrasting his company with Pocket PC maker Microsoft, Mace notes, "We've got better Visual Basic." But since most users aren't likely to care about development utilities, Palm is adding features including SMS messaging, multilingual support, and an MP3 player.
Still, Mace attributes Palm's success to a strict policy of simplicity. "A lot of companies were trying too hard. They were trying to build these things into miniaturised PCs," he says. "Whenever you do that you wind up compromising so much that it ends up being a sucky PC, but it's also not a very good handheld. What really matters is end-user performance, not the clock speed. The lower the clock speed is, the longer your batteries last. You want a small amount of memory, because the more memory you have, the more power it draws."
Comparing Palm devices with Pocket PC-based devices, Mace quips, "They will be dead in three days if you don't recharge. A Palm will go one to two weeks."
While wireless Internet access will probably be the final proving ground for handheld devices, Mace downplays the influence that new PDA-phone convergence devices will have on the marketplace. "Better than 90 percent of our customers already have cell phones," he says, believing users will react as tepidly to integrated wireless devices as they did to built-in printers during the mid-1990s.
Regardless of advancements in the company's own product line, the force of Palm's competitive strategy lies in the so-called Palm economy, which consists of more than 145,000 autonomous developersâ€"all designing products for the Palm OS. "These are the things that are going to push the personal companion market in new directions and affect vendors of both hardware and software solutions," says Alex Slawsby, an analyst at IDC's Smart Handheld Devices program.
But the increased prominence of third-party vendors like Handspring and Sony, which both offer powerful Palm-based devices and pay a license fee for the OS, might not be entirely good for Palm. "From a purely strategic point, while it does allow for increased penetration of the operating system on different form factors, the revenue stream changes when you've got devices running your OS competing against devices you manufacture," Slawsby says. "That's something we're keeping an eye on. The winner in the end is the consumer."
Though IDC predicts that Palm will continue to dominate the market until 2004, Slawsby believes Palm's long-term future is anything but secure. "We're seeing new purchasers consider Pocket PC," he says. While existing Palm users are fiercely brand-loyal, Slawsby notes that "as the market expands, Microsoft has a strong brand recognition with people who are coming into the workforce today, given that a lot of them have grown up with Windows."
