Palm aims to reignite demand for handhelds

By Jennifer Tan and Franklin Paul

SINGAPORE and NEW YORK: Loss-making Palm Inc., the world's top maker of handheld computers, on Wednesday said corporate demand for handheld products was beginning to recover after a two-year, industry-wide slump.

Demand for handheld devices, which can hold thousands of phone numbers and diary entries, has cooled in recent years as a slowdown in the global economy caused consumers to rethink splashing out on the pricey pocket-sized digital organizers.

"We've started to see growth again in the corporate space, which is a positive sign -- we are cautiously optimistic," Todd Bradley, chief executive of Palm Solutions Group, Palm's hardware unit, told Reuters during a visit to Singapore for the ix2003 technology conference.

Palm hopes to capture some of that market with the launch of three new handhelds and additional accessories in much of the world on Wednesday, including the high-end Palm Tungsten T3.

About 10 percent of Palm's total sales come from business users, known as the "enterprise market," industry analysts say. The vast majority of the California company's worldwide sales are from consumer and retail channels, said Bryan Ma, analyst with International Data Corp (IDC) Asia-Pacific.

Revenues in the latest quarter to Aug. 31 rose 3 percent to $177.4 million.

Palm is buying Handspring Inc., uniting pioneers of the handheld computer industry in a bid to reignite demand and stave off competition. Bradley is to become president and CEO of the combined company. Palm is also spinning off its PalmSource unit, which makes the software for handhelds.

Bradley said Palm, which has nearly 40 percent of the global market for pocket-sized digital organizers, had met all the regulatory requirements for the merger and the final hurdle was shareholder approval during a meeting on October 28.

"We're in the process of soliciting votes from shareholders, and I'm fairly optimistic the vote will go well."

NEW PRODUCTS UNVEILED

Industry figures showed that sales of handhelds slipped sharply in the first quarter of 2003 from a year earlier.

Handhelds are used widely in only a few industries, including healthcare, pharmaceutical and insurance. "I do think there is room for growth, but the main inhibiting factor is constrained corporate IT budgets right now," IDC's Ma said.

Palm faces new competition from top personal computer maker Dell Computer Corp., which entered the handheld market late last year. Traditional rivals include makers of smart-phones -- handsets that double as digital diaries -- like Finland's Nokia and Motorola Inc., and models driven by Microsoft Corp.'s PocketPC software.

Bradley said he expected a seasonal boost toward Christmas, though he ducked questions on when consumer spending was likely to rebound. "We're optimistic about the holiday season," he said.

The addition of Handspring products such as the Treo 600 combination phone and organizer would be growth drivers for the remainder of its financial year to May 2004, he said.

The company launched its new models on Wednesday, including the Palm T3 at US$399. The model sports a high-resolution, large color screen that can flip its perspective from tall to wide, or portrait to landscape, and boasts wireless Bluetooth capability and faster processing speeds.

It also unveiled the Palm Tungsten E at $199, with hopes the low price and beefed up information management software will spur the millions of current handheld owners to upgrade.

Palm also introduced the Zire 21, a new handheld in its entry level line, at $99.

Palm shares closed up $1.24, or 6.4 percent, at $20.57 in Nasdaq trade on Wednesday. The stock has gained about 23 percent since the start of the year.

© Reuters