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RealTime IT News

How Low Can Handhelds Go?

In a move symbolic of the cost-cutting and value-adding battle between top handheld makers, Handspring Inc. Tuesday trimmed $50 from its flagship phone price tag in addition to spicing it up with wireless and e-mail applications.

VisorPhone will now sell for $449 as a standalone product and retail for $249 for customers who want the full Handspring package, which includes the Wireless Internet Access Suite of browsing, messaging and e-mail apps.

The move is consistent with chief rival Palm Inc.'s price slashings; Palm Monday cut its VIIx handheld $100 -- from $299 to $199. Add to that a $100 rebate once buyers sign up for the Palm.Net Internet access service (which begins at $25 a month) and the VIIx clocks in at a svelte $99.

While it seemed that just months ago IDC analysts predicted that Microsoft and Research In Motion (RIM) (of Blackberry wireless pager fame) would begin to make inroads into Palm's and Handspring's market shares, a new problem has cropped up. Both Handpring and Palm have bowed new handheld models in recent months, but now it seems they have a deluge of extra, more dated models.

As for the newly discounted Palm VII, that product was introduced in October 1999 for $499. Indeed, Handspring's latest discounted product, its VisorPhone, debuted in September 2000. Handpring has played it smart, however. Tuesday the company bundled a CD that includes Handspring's new Blazer Web browser, Yahoo! Messenger, JP Mobile One-Touch Mail for the sending and storage of memos and Electric Pocket's BugMe! Messenger, which allows users to send and receive handwritten notes, diagrams, sketches, pictures and photographs.

Key among these features are the new Blazer, which is based on Palm's leading handheld operating system and features content powered by Microsoft's MSN Mobile and search capabilities provided by Google. When used with a phone or modem module, Blazer brings Internet access to the Visor. Blazer supports all major existing standards, optimizing HTML, WAP and cHTML content for viewing on a handheld display.

Still, the price slashings have caused analysts to sit up and take notice. With inventory maxed out and sluggish sales presiding over hardware firms, Lehman Brothers Monday cut share-price targets on Palm to $11 from $25 and Handspring to $18 from $28, citing the Palm price reduction. One can only imagine further cuts after Handspring's news.

The firm believes the pricing war will have a cannibalistic effect on near-term margins. Specifically, Lehman Brothers believes Palm's drastic price reduction for VIIx will eat up some of the sales of Handspring's lower-end models, which would seem to make it Handspring's next chess move. The $50 cut on its VisorPhone is probably not the answer.

Monday's and Tuesday's actions by the handheld outfits seem to be follow-ups to maneuvers made by the companies in recent weeks. Last week, Handspring lowered prices on its Visor Deluxe (from $249 to $199) and Platinum models ($50 rebates). In April, Palm cut the price of its Palm Vx from $349 to $299 and said it would reduce the low-end m100 from $149 to $129.

Overall, analyst consensus seems to dictate that Palm and Handspring need to clear out the warehouses of some of the older models before launching next-generation "always-on" models priced in the $400 to $500 range.