Palm fights to keep lead in enterprise PDAs

Revenue forecasts slashed, share prices scraping the barrel at $4 - it doesn't look good for Palm, but UK managing director Bill McKay is putting a brave face on it

As Networks Telecom 2001 gathers momentum at Birmingham's NEC, employees on the Palm stand could be forgiven for having a far away look in their eyes. For this week's big Palm news was the announcement of the firm's second quarter results in New York. With analysts predicting a loss, and competition from rival PDA manufacturers intensifying, these are nervous times for Palm people.

It has been a tough year for the company, with revenue forecasts slashed and its once high-flying share price down to less than $4. Little wonder that chief executive Carl Yankowski recently told analysts that the company was weighing up plans that could mean "dramatically changing our business model".

Whatever those 'dramatic' plans turn out to be (the rumour is that they will split hardware and software into two divisions), the events in Birmingham this week will prove equally interesting to Palm watchers. The attendees at Networks Telecom are exactly the audience Palm must win to its platform, in that it must persuade IT directors and systems administrators that the Palm platform is now enterprise-ready. Palm's UK managing director, Bill McKay, is not convinced that Microsoft's strength in business software will enable the software giant to take Palm's crown as the leading PDA operating system.

Speaking to ZDNet today at Networks Telecom at the NEC, he cited examples of British Gas and Cadbury Schweppes as two large UK enterprises that have adopted the Palm platform. McKay is also sceptical that the success of iPaq represents a resurgence of PocketPC.

"Is it really that, or is it just a certain kind of person buying the latest cool device? We have 150,000 developers around the world working on Palm applications," he said, stressing the importance of the partnership with Extended Systems -- a company that Palm had hoped to acquire earlier in the year. Extended will develop and market products that provides companies with mobile access to existing enterprise software, such as customer resource management or enterprise resource planning tools.

McKay said Palm's hardest challenge will be to convince the small and medium-sized firms to choose Palm -- but is confident that Palm will maintain its lead. "It is not realistic to believe that you can own the whole market -- but we intend to maintain our leadership position."

This will not be easy. While Compaq's iPaq has increased its march into the enterprise via Pocket PC's integration with Microsoft Outlook, Palm's partner -- IBM -- has been slow to develop the Lotus Notes/Palm interconnectivity. Gartner's Ken Delaney put it more strongly to a CNET reporter yesterday: "What the heck is IBM doing? Why isn't Notes-Palm as formidable as Outlook-Pocket PC? They are letting Microsoft get away unscathed."

The profile of the Palm platform may also be viewed as more consumer and less appropriate for business than, for example, a Compaq iPaq pre-loaded with standard Microsoft business applications. Adding to this less than helpful consumer profile are Palm OS fellow travellers, Sony and Handspring -- neither of whom position their PDAs as sober business tools.

It may well be that Palm's real drive into the enterprise will require an entirely new generation of device. Due later this year, the m700, codenamed "Skywalker" is supposed to be an always-on device with push email functionality that will compete with Research In Motion's (RIM) popular BlackBerry email device.

The BlackBerry, already a hit with business users in the US, is just coming out in the UK through a deal with BT Cellnet. But a report this month from Bear Stearns expressed concern that Palm may have legal trouble releasing Skywalker because RIM recently secured a broad patent for single-mailbox integration.

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