Q&A: PalmSource CEO David Nagel

In the next few months, Palm Inc. will officially separate into two publicly traded companies — Palm Solutions (hardware) and PalmSource (software). Since announcing the split last year, PalmSource CEO David Nagel has forged ahead with a completely new handheld operating system (OS 5.x), new places to grow (China) and new product opportunities (Fossil’s Wrist PDA, Garmin’s iQue 3600 GPS-enabled handheld).

Now as he stands at the crossroads, Nagel tells internetnews.com that spinning off is the best thing that could have happened and that he is seriously contemplating the benefits of adding some PalmSource code to the open source community.

Q: What is PalmSource’s direction going forward as it separates from Palm Inc.?

Most of the actual separation — the people and the properties — has already taken place. We’re working though the final details. The board has already made decisions in anticipation of the split. The next formal step is a file what is called a Form 10 with the SEC, which allows us to become a separately traded company, because the strategy is still to do a “spot distribution” for investors. We have not filed that yet. Part of that is market timing and semantics. It should take a couple of months.

Q: Do you see yourself in a better position than say Palm Solutions CEO R. Todd Bradley because you are basically starting a new company?

Being the spinner has psychological advantages, but I think that the actual psychological impact is lessened here because Palm made the choice years ago to license the operating system and because the split was announced last year. We don’t start as an underdog – we start as an industry leader.

Palm has been issuing segment data in its earnings reports for the last year, so on the conference call on March 20, you will be able to see fairly well if we are declining in revenue or growing in revenue or where we are in profitability and a get a pretty good year-over-year comparison.

Q: What about the news that Sony chairman and CEO, Nobuyuki Idei is interested in acquiring Palm’s software division if it were for sale? Would you sell PalmSource to Sony?

I think that is old news. He said the same thing at the World Economic Forum in Davos back in January. We can’t comment on those kinds of rumors. To be honest, I was mostly amused by his candor as the head of a major corporation.

Q: What is the role of PalmSource in non-PDA devices?

Our business model is quite different from Microsoft… and the name says it clearly, Pocket PC represents a reprise of the PC business. It worked great for them in the PC industry. When the industry moves to a new type of product, and we think in the case of handhelds, maybe a new kind of fundamental shift has happened. We have said, instead of everyone building an exact copy of the hardware, we sort of specify that you have to be on our one or two microprocessor family — either 68K or ARM — with a strong push for people to adopt ARM as much as possible. Other than that, there is precious little other that you have to do except pass our software compatibility suite to be registered as a ‘Palm Powered’ device. Because of that, you see a range of devices that you don’t see in Pocket PCs.

Q: Does it limit you too much to focus only on battery-powered mobile devices?

Not really. We think that is going to be a nice market. If you throw together all the handheld products of this class, I would put in things like MP3 players and digital cameras and digital devices that have some type of operating system. We also make a distinction between us and other companies in that we are a platform company. We release our APIs and encourage software companies to develop based on those APIs.

Continued on page 2 with: “The Future of PDAs”

The Future of PDAs

Q: Do you see the PDA going away?

It’s sort of a work in progress and I don’t think anyone knows the answer to that. Obviously there are lots of new products being developed that fit into one category or the other or somewhere in between. The Treo is very much a phone but many people think of it as a PDA. My guess is that the market will vote for a variety of form factors, because what we’re seeing in the market is moving into pretty sophisticated segmentation.

There are also important regional differences. In Asia they are looking for style, especially in an emerging market like China where it is a status symbol. In Europe, it’s not surprising the most successful devices are the phone-like devices. In the U.S. the markets are more open to the data-centric devices.

Q: What is the greatest reward/challenge of moving from Palm OS 4.x on the Dragonball processor to Palm OS 5.x based on ARM architecture?

First of all, suddenly we don’t have the problem that we don’t have enough computing cycles to do some of what our licensees what to do. You take Sony the new Clie’ NZ 90 which has got a 2 megapixel camera with MP4 capabilities. That was simply impossible to do with a Dragonball. What you hope to see is the licensees being freed from some constraints, even the Tungsten T is in that category. And we’re beginning to get new product categories. Some we have seen. Some have yet to be announced that will make it clearer why the move to ARM was so important.

What has been a challenge is that this has become a very competitive space. Microsoft and Symbian have become competitors. So we have to continue to innovate. I think the bigger problem is that not everyone who buys one of these products considers buying third party software or even knows that they exist.

Q: What is your message for developers who may be tempted to jump to Microsoft CE or Linux for PDAs?

Some do. All of the things being equal in the market, the number of Palm powered devices is somewhere north of 25 or 26 million and the Pocket PC ones are about 10 percent of that. You probably got a better chance of making a living designing for the larger market. If you have a product that can work on both and hits both segments, we say ‘go for it’.

We track developer registrations and de-registrations and one of the best indices of how successful a platform has become is how much developers continue to write to it. When I think of where we are now to where we started; we had 15 percent market share to where they are today. And developers should stick with us. We have a seminar in May in the Silicon Valley that is focused more on native development.

Editor’s note: Nagel later said the company would be touring to various countries this year with seminars for developers.

Q: What kind of compatibility will we see in future handheld devices?

We spend a lot of our engineering resources making sure we are compatible both backward and forward and such and so forth, but also with Widows. Windows is a fact of life on the desktop and as long as synchronization is important — and we think it is — we will maintain that compatibility. We’re pretty good now but I think we can do better.

Q: How do you aim to do that?

I think the openness of the Internet standards has shown the power of truly open standards. And that open source model is here for good and there are enough checks and balances. We haven’t talked about this much because we have not formalized this as much as we will in the future is that… I like a lot of the aspects of the open software movement, in the sense that you get as many IQ points focused on a problem as you can get. There are some problems in the open source model as it applies to a business like ours but the general idea to get more people to help you is a very good idea. One of the things is that we see is that not only will all the phones in the future — say ten years — have an operating system, but I think they will have an open operating system.

Q: Does this mean you are looking to contribute to the open source communities and their standards groups?

I certainly would consider it and there are some candidates that are being talked about. Some of them we do already. For example, the PIM code is released to developers today and a lot of third party products are based on open source availability of that code. In that sense, I’d say we are already a part of the open source community. Where we have the opportunity to do that, we will do more of that. It reduces expense to us and gets more people working on a problem in a shorter period of time.

Q: So would the goal be that the Palm OS opens itself up like a Linux?

[Laughs] I don’t want the headline to be ‘Palm goes open source’ because that would be inaccurate. I’d say we’re more like Microsoft than we are like Red Hat today. But we do see that there is some virtue in the model and we’re looking at what we can do that is very close to the open source model in its complete form. Are there other areas such as synchronization in which we could throw it out there and take advantage of the situation?

I am a proponent of openness in all things. I think that in this day and age that companies have to be willing to be much more open to the good things that could happen as well as the risks that might happen.

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