Palm isn't dead--at least not yet

It's ironic that Microsoft was planning Pocket PC's first birthday party around the same time Palm lost almost half its value in the stock market. If there's any connection between the two events (Palm says it was an inventory problem, not a competitive issue), is one year all it takes for Microsoft to dispatch a well-entrenched competitor? A frightening thought.

If you believe, as my AnchorDesk colleague David Coursey does, that Pocket PC will steamroller Palm, then perhaps so. Fortunately, when he asked to be invited to Microsoft's victory party, David, a card-carrying member of the Pocket PC brigade, included a disclaimer: He's short on substantive data regarding Palm's future plans.

Being a five-year devotee of the Palm platform, I wondered whether I should step into the ring with David to publicly duke this one out. Prompted by Palm's precipitous drop in market cap, I decided it was worth a few calls to Redmond and Santa Clara, Calif. Now, I'm more confused than ever. But if I had to issue a status report today for IT managers thinking about standardizing, it would start with, "It may take another year to figure this out."

The similarities outweigh the differences

Both recognize corporate acceptance as imperative to long-term success. In the biggest of big pictures, Palm and Microsoft are coming at this from opposite ends of the same spectrum and are destined to meet in the middle where everything from handheld devices to wireless strategy to back-office server support will be remarkably the same Dennis Kelly, Palm's vice president of Internet Services, says the question is, "Who will get there first?"

At one end of the spectrum is Palm. Palm started by achieving significant corporate penetration via the handheld device itself. Now, it's investing in infrastructure to provide an end-to-end solution that keeps workgroup-based PIM (calendar, contact, memos, etc.) and corporate application data (CRM, ERP, etc.) seamlessly in sync with those devices via both wireless and wired networks. In the last year, Palm has either completed or announced the acquisitions of AnyDay.com, WeSynch, and Extended Systems--pieces that will help Palm complete the server and synchronization side of the puzzle.

Microsoft, at the other end of the spectrum, penetrated corporate America with its infrastructure. To achieve its end-to-end solution, it's playing catch-up on the device-side of the equation. After several generations of its handheld OS, starting when Windows CE was showcased on HP's color LX devices, the renamed Pocket PC operating system is now getting serious lift thanks to Compaq's iPaq.

Both companies are trying to stitch the whole enchilada together. Palm has many of the pieces in place and is now getting them to work in harmony, along with the two pre-eminent groupware platforms--Microsoft Exchange and Lotus Domino. Microsoft is sharpening the final nail in its strategy--Mobile Information Server, middleware that most closely compares to the technologies Palm will get from its Extended Systems acquisition.

Finally, both are accommodating non-PDA devices, such as smart phones, by modularizing the operating systems. Each sees the need for a common kernel that is customized with device-specific extensions. Palm licenses its OS source code and leaves the extension work to be done "open-source style" by device manufacturers. Microsoft does not license the Windows CE source code, but will extend the OS accordingly to the partners it knows it needs to accommodate.

On the development side, the playing field is pretty level. With only a handful of major single-source wins to either company's credit, both acknowledge that little, if any, standardization on one platform or the other is currently taking place. Most serious application development in corporations and at enterprise software providers, such as Siebel, SAP, and PeopleSoft, is addressing both platforms at the same time and with equal vigor.

So is anything different enough to affect the long-term prospects of either platform? You bet.

Palm achieved its success based on three principles--simplicity, size, and battery life--principles the company will continue to pursue, according to Chief Competitive Office Michael Mace. Mace says the Pocket PC is too big, too complex, and requires too many pit stops at the recharging station to be appreciated by anybody but the techno-elite who are typically willing to make such sacrifices to own a pocket rocket. "Handheld technology is immune to Moore's Law," he says. "The situation is not about to improve for Pocket PC any time soon."

But in the same breath, Mace speaks fondly of the forthcoming Palm 500 and 505 and the Secure Digital expansion slot both will support. Within a year or so, he anticipates this slot will allow Palm users to have up to a gigabyte of memory. If this is the case, then Moore's Law appears to be in full effect, meaning that Microsoft could benefit from the same advancements. In fact, that kind of advancement in memory technology could easily ameliorate the Pocket PC weaknesses cited by Mace.

Compaq's iPaq is about the same size as a Palm VII. Proving that battery life is out of Palm's control once the OS finds its way into more general-purpose devices, my Palm-powered Kyocera phone wiped out its battery in less than two days vs. two weeks for my Palm V. Palm-powered phones won't compromise just battery life either: The simplicity that characterizes Palm handhelds went out the window with Kyocera's phone.

While Palm continues to focus on its traditional priorities, Moore's Law isn't even a question at Microsoft. Microsoft's cites a plethora of devices and form factors--handhelds, smart phones (some already shipping in Europe)--that sound very much like what Palm is promising. The device road maps of both companies appear to be heading to the point at which Moore's Law will no longer be a differentiating factor.

Microsoft's Mobility Group has one key priority--data, says Product Manager Ed Suwanjindar. He says Microsoft is focused on getting data out to handhelds (which Microsoft considers the "fingertips" of the corporate network) in a way that is optimized for the form factor (meaning display type), tailored to time-sensitivity requirements (real-time and off-line), and tuned to the specific business applications. Microsoft has one distinct advantage in this respect. I'm guessing that at least 50 percent of the data that needs to find its way into handhelds (much of it corporate e-mail) already resides in repositories that Microsoft owns--Exchange Server, SQL Server, and Microsoft Access. Palm, in contrast, owns no repositories (unless you count its online repository/synchronization service AnyDay, which I don't).

Extended Systems' CEO Steve Simpson, who will take the helm at Palm's Enterprise Systems Group post-acquisition, also has data as his charter, but it's not a top priority. Case in point: When I mentioned data incompatibilities between the Palm handhelds and AnyDay that make complete synchronization impossible, Mace claimed the problems were resolved by a new version of AnyDay called MyPalm.Net. Evidence that there may be a lack of cohesion within the ranks at Palm, Kelly, one of AnyDay's founders, says Mace was incorrect and that the problem would be resolved in July. July?

"The focus since the acquisition has been on the integration of the company," Kelly says. "We were acquired and put into a group that focuses on Palm's wireless strategy. We took the back-end subscriber infrastructure of AnyDay and married it to the Palm.Net wireless back end. When we launched MyPalm, it gave all subscribers to Palm.Net automatic access to the Net-based PIM. Some things had to come second."

Meanwhile, I've ditched AnyDay in favor of fusionOne.com, which isn't perfect, but is much better than MyPalm.Net.

All this brings us back to the question of whether it's time to administer last rites to Palm. Palm will probably never die at the hands of Microsoft or any other competitor. But it would do Palm some good to review the history of former industry titans Novell, Wordperfect, Lotus, and Netscape. All were hands-down leaders in their respective markets reduced to footnotes shortly after Microsoft opened up its war chest.

Extended Systems' Simpson sees Palm's increasing device-agnosticism (an attribute of both the Extended and AnyDay platforms) as a major advantage over the Pocket PC strategy that Microsoft's Suwanjindar freely admits is focused on advancing Microsoft's .Net agenda.

But history tells us that Microsoft competitors rarely get far by raising the nonproprietary issue. Microsoft eventually supports the standards that really count--at least to the extent that customers are either satisfied, or think they are.

Can Palm hang on? Except for focusing on old priorities, it is doing the right things. As a part of its acquisition strategy, it must continue to get complete control of the platform's food chain. The OS, Internet services, and synchronization middleware are not enough. Owning a development environment has served Microsoft quite well in the advancement of its operating systems, and Palm executives speak so fondly of mobile development tool maker AppForge that I wonder if talks are in the works. Palm is also partnering with an unnamed Accenture-class consultancy to form an as-yet-unannounced consulting division, currently code-named the Mobile Service Bureau. (Oh, Microsoft has one of these, too).

Once these steps are complete, it will have to continue to support non-Palm environments only because it has no choice. This is mostly the case with application servers, where Palm has no offering and never will unless it is acquired by a company that does, such as IBM (the only company that has the resources and seems committed to unseating Microsoft). Whether 3Com, Palm's biggest stakeholder, would be interested is a different story.

Leaving other parts of the food chain open to Pocket PC will do Palm no good. Sure, it gives those in the Pocket PC world a chance to hop the fence, but what is good for the goose is good for the gander. Palm will need to devote all its resources to the success of one platform, leaving no openings for a competitor like Microsoft to siphon off its user base.

Ultimately, Palm's success may depend on getting out of the hardware business altogether. Better to let companies like Kyocera and Handspring worry about razor-thin margins while they pad Palm's pockets with OS licensing fees--which are ultimately more lucrative and cause fewer headaches.

Even that may not be enough, but I hope it is. I like my Palm V, feel comfortable in its environment, and look forward to future offerings from other licensees and playing with my new phone. But part of me is thinking that David Coursey may get his victory party invitation after all.

We'll definitely know more in a year.

You make the call--Palm or Pocket PC? Talk Back below. David Berlind is editorial director/general manager of ZDNet's Business & Technology channel.