January 04, 2001, 8:19 AM — Here's one of my favorite Silicon Valley tales. See if you can guess the players.
It begins with a group that designs a most impressive operating system, far more elegant than anything else the world has seen. The initial device it ships on is monochrome and has an anemic 128KB of RAM, and it is dismissed by many as a toy. Eventually, with some new hardware designs, increased memory and color support, the machine is a success.
Yet the core product starts to languish. Instead of improving the technology, the company focuses on meaningless differentiation, such as case colors. In an attempt to boost revenue, it licenses the crown jewels to other hardware vendors, which begin to take away market share. The company is flying high, enjoying seductive gross margins and completely ignoring the fact that the original platform visionaries have left to build a competing product. Meanwhile, a few hundred miles up the coast in Redmond, Wash., Microsoft, after two failed efforts, has released the third version of an operating system designed to compete with this product. And, as with many of its previous products, Microsoft finally got it right the third time.
Many of you might think that this is the story of Apple. But actually, it's Palm. Today's Palm bears a striking resemblance to Apple in the mid-1990s, and not merely because many senior Palm execs are Apple alumni.
While Palm seems to have lost its ability to innovate, both Handspring (founded by Palm founders Donna Dubrinsky, Jeff Hawkins and Ed Colligan) and Microsoft have released new and innovative products. Palm has yet to update an increasingly aging product in the guise of Palm OS, and it's rapidly losing market share to Handspring's Visor and Microsoft's Pocket PC devices.
Handspring's major innovation is the Springboard expansion slot, which offers the ability to turn a Visor into a digital camera, an MP3 player and even a GSM-based cell phone. In addition, it offers the only 16-bit color version of a Palm OS-based device to date.
The Pocket PC platform offers extended functionality in a handheld. In addition to serving as a basic personal information manager, the Pocket PC offers scaled-down versions of Word and Excel to view documents on the road, a full-featured e-mail client, Pocket Internet Explorer, an e-book reader and even an MP3 player.
For business users, this has practical ramifications. Because of Handspring's extended hardware efforts and the popularity of the Palm V's sleek and thin design, the Palm OS will likely find itself driven forward, and Palm-based devices won't be obsolete anytime soon, making them a safe IT purchase.
Users who require basic organizer functionality will, in fact, be best served by the Palm OS, but they probably should consider a Handspring device with Springboard expansion.