Handspring adds colour to Treo

The Treo 270 finally makes its debut, but it may not be enough to bring colour to the cheeks of the smartphone market

As expected, Handspring has launched the long-awaited colour version of its wireless handheld device, as it attempts to shore up its market share against rivals such as Sony and Palm. The Treo 270 launched in both the US and the UK on Tuesday, making it one of the first colour smartphones on the market.

The company has also launched the Treo 90, similar to the 270 but without wireless capabilities, in the US market. A company spokeswoman said the Treo 90 will be available in Europe at some point in the future, but said "details are hard to come by". The Treo 270 retails in the UK for £549 without a wireless connection. The Treo 90 retails for $300 in the US.

Handspring chief executive Donna Dubinsky alluded to the Treo 90 release during the company's first-quarter earnings conference call last month, saying Handspring would launch an organiser that would fit into its communicator strategy but was not itself a wireless device.

Both Treos use the Palm OS 4.0 operating system, and include 16MB of memory. The 270 doubles as a dual-band GSM 900-1800 mobile phone, with a built-in miniature QWERTY keypad for sending emails and text messages. The device can access the Web via the Blazer browser.

The Treo 270 is advertised for £549 on Handspring's Web site, although the site processes the price as 880 euros, or £559. The devices follow up the UK launch of the black-and-white Treo 180, which sells for £499 without connection, in March.

Handspring's handheld market share is slipping and as the company has watched unsold inventory of its devices build up more than those of its competitors' products. Even as more companies enter the market for wireless email and communications devices, consumer acceptance has remained lukewarm.

In March, Sony and its Clie handhelds took over the No. 2 market share position from Handspring, according to research firm NPDTechworld. Palm maintains the top spot, with 54.3 percent of the retail market, followed by Sony, with 15.4 percent, and Handspring, with 14.5 percent. NPDTechworld tracks shipment numbers from manufacturers to retail stores.

Additionally, Handspring's products have started to pile up at retailers and distributors, according to a report by securities firm UBS Warburg earlier this month. Handspring's US retail inventory level had grown to 14.5 weeks as of 1 April, up from 11.3 weeks a month earlier and 9.6 weeks' worth a year ago.

Handspring's Dubinsky said during a conference call earlier this year that the company is transitioning its business and will eventually stop making traditional handheld organisers in favour of its wireless Treo communicators. The transition is expected to happen gradually for Handspring.

Underscoring the difficulty of that transition was the fairly slow start for Handspring's Treo 180. Handspring shipped 47,000 of the devices in the first quarter, the company said during its earnings call, but only about 13,000 of the devices made their way into consumers' hands.

This isn't stopping competitors from jumping in to the market. In Europe mobile phone makers are offering a variety of smartphones with organiser-like capabilities, including Nokia's Communicator and Ericsson's R380, with more on the way this year. Microsoft and the UK's Sendo will launch a Windows-powered Smartphone 2002 handset in the UK this autumn.

O2 will sell a Microsoft-powered smartphone called Xda later this year as well. The company is already selling Research In Motion's BlackBerry email devices to business users.

Research In Motion (RIM) dominates the US market for email devices, with about 321,000 subscribers to its service. In March, RIM launched its new BlackBerry email gadget, the 5810, which includes phone capabilities. Palm has also added email to its handhelds with its i705 device, available only in the US.

Though these gadgets offer greater functionality than other types of handhelds, the problem is that the "communicator market isn't all that big right now", said Stephen Baker, an analyst with NPDTechworld.

For Handspring, "this is a tough point in the development of the market to give up the business they've built on the (personal digital assistant) side, because those kinds of volumes won't be seen in the converged market for a couple of years," Baker said.

Prudential Securities analyst Kimberly Alexy said in a research note that Handspring is betting the company on Treo's success as it slowly phases out sales of the lower-priced Visors.

"Handspring is clearly making a 'make the company' type of bet on Treo, as Visor sales will ultimately be phased out unless pricing materially stabilises," Alexy said. "In addition to the Treo, Handspring appears increasingly willing to bet on colour versus monochrome and may also be phasing out (black-and-white) offerings as well."

The ultimate goal of these product changes will be to create "a more favourable business model", Alexy said.

News.com's Richard Shim and John Spooner contributed to this report.

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