Among the ruins of a technology company wasteland where weak business models
and the firms that pose them are blowing away on the wind, stronger firms
are soldiering on by shifting market schemes. In a time where
highly-regarded companies are laying off scores of employees or
consolidating their businesses, Palm Inc. is one of the stronger firms.
While analysts see the potential in different facets of a bullish prism, the ith only a few players — AvantGo, RIM, and Microsoft
On Wednesday, the 60-percent market share holder of handheld computers
shelled out $264 million in stock for Extended Systems,
a purchase that caused industry watchers to sit up and take notice — and
not just because it’s Palm’s largest buy to date.
Palm seems to be making significant inroads in the
mobile enterprise market, already buoyed by Research-In-Motion (RIM, of
Blackberry wireless pager fame), Puma Technologies and AvantGo.
Francesca Mabarak, senior analyst in Yankee Group’s Wireless/Mobile
Technologies division, told InternetNews.com the move looked like a strong
play for Palm Inc.
“This will have a tremendous effect on Palm as they try to maintain market
share with an obvious momentum being created by RIM. Extended Systems is an
excellent company with a good vision for the enterprise market,” Mabarak
said. “If Palm is going to gutsier with offerings, then they got a great
deal with Extended Systems.”
Ditto Scott Nania, an Internet technology consultant for About.com, who
touched on the fact that Extended is one of the Bluetooth wireless
technology founders.
“Extended gives them good penetration into the market and continues their
push to become a major player as software solutions provider,” Nania told
InternetNews.com. “It also gives them an edge in the Bluetooth arena.
Instead of watching Bluetooth develop from the outside now they are an
insider and can steer the development to a certain degree.
Extended, Explained
question remains what Palm, the acknowledged leader in handheld computer
manufacturing and a 3Com spinoff, will do with it. Simply, Extended Systems
makes an enterprise software synchronization solution (called, easily
enough, Extended System) that brings Palm’s operating system behind the
firewall with access to applications.
Extended System is compatible with Windows products, RIMs, and Symbian
devices. The company boasts more than a thousand enterprise customers, which
translates to more than 100,000 end-users.
Goldman Sachs, which pegs the mobile enterprise market at $13 billion by
2005, said in a recent research report that Extended System’s solution
covers the recurring service aspects of this market, which is about $6.3
billion. GS allotted an additional $3 billion of its valuation for
Extended’s solution for add-ons. So how will Palm use this solution?
GS said Palm will use the company’s apps to complement its pending VII
release, which will feature corporate e-mail and enterprise applications.
Palm, which also said this week that it would reorganize into three distinct
groups (the Enterprise Solutions Group, the Individual Solutions Group, and
the Platform Solutions Group), plans to incorporate Extended Systems’
middleware as part of its wireless service bureau, slated to launch next
quarter.
Market Impact
Accordingly, the positive news has caused analysts to come out and issue
“buy,” or even “strong buy” ratings. Eric Rothdeutsch, a semiconductors and
computer hardware analyst for Robertson Stephens, said the news was
favorable.
“We feel that Extended Systems is a solid addition to the company’s wireless
and mobile strategy with its enterprise-class mobile infrastructure software
and multiple operating system support,” Rothdeutsch said. “We are
reiterating our buy rating and 12-month price target of $35.”
Tom Sepenzis, executive director of CIBC Worldmarkets, said Palm has made
headway in a niche w
and Oracle to a smaller extent.
Sepenzis, who posted a “strong buy” rating and pegged Palm to reach $70 over
the next year, said there is still a ways to go before Palm becomes the
“operating system that has the ability to wake up and alert people to an
e-mail or calendar change.”
It seems with all of the bullish bluster that perhaps the only parties who
may grumble about the Extended acquisition are Palm’s competition —
Handspring, RIM, AvantGo, etc. But if they are grumbling, it’s very low.
Queries asking Handspring, RIM and AvantGo to comment on Palm’s moves went
unanswered this week.
But Palm isn’t just trying to bolster its handheld offerings (okay, so it
did release a new model this week — the m105), it’s trying to make its operating system ubiquitous, too.
You Can Put the Solution Inside the Palm, but Can You Make Palm A
Solution for the World?
In a word, yes. It’s called the QCP 6035 Smartphone by Kyocera Wireless and
it just happens to be another one of the cookie jars, Palm has put its,
well, hands in. What it does is marry the convenience of the telephone with
handheld computer functionality. With it, gadget-loving consumers don’t have
to juggle multiple devices. Consumers can flip down the hinged keypad to
reveal a fully functional Palm, with all the familiar capabilities, icons
and buttons.
The CDMA phone is based on the Palm OS version 3.5 and includes standard
Palm applications. It can also use any applications developed for the Palm
platform. It comes with 8 megabytes of RAM.
The SmartPhone is hardly big and clunky; the device measures 5.6 inches by
2.6 inches and is less than one inch thick. The Smartphone was rolled out by
Verizon Wireless Monday for $499, or roughly double the cost of Palm’s m100
series.
Now whether or not Smartphone will be a big seller is anyone’s guess. Like
Palm, Handspring, Sprint and Ericsson have all tried to successfully merge
and market phone/PDA devices with minimal success. Some are more like
phones; others are more like handhelds. All are tough sells thus far.
To be sure, one obstacle all of the firms face is the unenviable task of
selling their products to a general public that is bracing for economic
downswing.
