Palm Has Designs on Microsoft Mobile

UPDATED: In a major shift in the PDA industry, Palm is expected
to announce today that its Treo 700 smartphone will be powered by the
Microsoft mobile operating system.

Palm President and CEO Ed Colligan, Microsoft Chairman and Chief Software
Architect Bill Gates and Verizon Wireless CEO Denny Strigl are expected to
make it official during a noon news conference at The Palace Hotel in San
Francisco.

“[Palm and Microsoft] have obviously competed, sometimes vigorously, but
things have changed,” said Colligan, who noted that his company no longer
develops operating systems or simple organizers.

The device will be available early next year and cost slightly more than
current Treos. At first, Verizon Wireless will sell them exclusively
through its retail stores and sales force. Palm will bring the new Treo to
other carriers in mid-2006.

Gates said the partnership targets a high-growth market.

“Every professional will have a phone that connects up with their e-mail,”
Gates said. He noted that the Microsoft-powered Palm will sync with
Outlook and Exchange and should provide new applications because there are so many developers
working on the Windows platform.

Colligan called the collaboration “one of the worst-kept secrets” in the
industry. Last week, pictures of a Treo
with the familiar Windows OS on its color screen and Verizon Wireless
branding on its case appeared on Engadget.com.

Treo 700

The Palm Treo 700 will run Windows Mobile.

Source: Microsoft

The companies offered few specifications of the new Treo other than to say
it will be powered by Intel processors and run over
Verizon’s EV-DO network . Engadget said the new Treo will also
feature a 1-megapixel camera, Bluetooth and 64MB of
memory.

Palm may continue selling Palm OS alongside Microsoft OS Treos, which are
popular with business executives because they can reduce the amount of
communication devices they must carry.

Treos combine voice, e-mail, calendar
and other organizational tools. Colligan, Gates and Strigl said they all
plan to use the new Treo as their primary smartphone.

But market trends suggest the move to the Microsoft OS is more about fading
out a slipping product than it is consumer choice.

Palm OS was once the dominant PDA OS, but its market share has steadily
eroded. According to second-quarter 2005 data
from Gartner, shipments of Palm OS-enabled devices now represent 19 percent
of the PDA market, a dramatic fall from 42 percent in 2004.

The Palm OS has lost share to Microsoft, which held a 46 percent market
share in Q2 according to Gartner, followed by RIM, whose popular BlackBerry
devices have helped it take a 23 percent market share.

Corporate changes haven’t helped Palm’s focus, either. The company split into
two separate units in October 2003: Palm focused on hardware and PalmSource
on the OS.

Then, earlier this month, PalmSource was bought
by Tokyo-based Access for $324 million. There was some speculation that
Palm would reintegrate the unit, but a deal was never made.

The companies’ announcement coincides with the kickoff of the CTIA
Wireless IT and Entertainment show in San Francisco.

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