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Microsoft-Palm: A Timely Link Windows Mobile 5.0 Needed to Be Developed First, Gates Says

Posted on: Wednesday, 28 September 2005, 12:00 CDT

By Laurie J. Flynn

Microsoft's truce with Palm, its longtime rival in palmtop software, was forged with a rare agreement to allow Palm to tinker with the Windows Mobile software, according to the companies' leaders.

Details of the new relationship emerged on Monday as Microsoft and Palm unveiled a Windows version of Palm's popular line of cellphone-organizers, the Treo, in a combined effort to capture a market that has eluded them both: corporate customers. Until now, the Treo has run only on Palm's operating system. But the Treo for Windows device, yet to be named, will provide the Windows interface that is the standard in most businesses.

"Customers and carriers have been asking for this," Palm's chief executive, Ed Colligan, said.

Bill Gates, the Microsoft chairman, said the companies decided to put their rivalry behind them more than two years ago, when a Palm founder, Jeffrey Hawkins, visited Microsoft to discuss a development and marketing agreement. But Gates said a partnership made no sense until Microsoft was well along in developing Windows Mobile 5.0, which it released in May.

"Palm always did great work," he said. "We lusted after some of the things they did well and wanted to combine them with some of the things that we did well."

Initially, Microsoft resisted the idea of allowing Palm to differentiate the way Windows Mobile worked on the Treo, but it eventually relented. Palm added interface elements like the ability to speed-dial by pressing a person's photo on the screen, the ability to decline to take a call by automatically sending a message rather than by ignoring it and the ability to go through cellphone voice mail with on-screen icons.

A combination cellphone and organizer, the Treo lets customers send and receive e-mail, view spreadsheets and create documents, as well as conduct a range of specialized tasks. The Windows version will be sold initially through Verizon Wireless, the second-largest U.S. cellular carrier, beginning early next year. No pricing details were given.

Palm said it would announce agreements with other carriers by mid- 2006.

The Treo for Windows will have features important to the corporate market that the Palm operating system lacks, analysts said, including sophisticated multitasking and integration with Microsoft's e-mail program for personal computers. Eventually, the Treo for Windows will be able to "push" e-mail to users rather than requiring them to retrieve it. Patrick Zerbib, an analyst with Adventis, a telecommunications consultancy in Boston, said it would be hard for the Palm operating system to match those offerings. "Microsoft is going to put its considerable resources behind it," he said. "It's going to be difficult for a small competitor to survive."

Palm produced one of the first hand-held devices in the mid- 1990s, developing hardware and software. In 2001, it spun off its software unit, PalmSource, opening the door to an eventual Windows version of its hardware. In 2003, Palm acquired Handspring, a company created by Palm's founders who had developed the Treo. The Palm operating system has struggled, and in August, PalmSource was acquired by Access, a Japanese company, for $324 million

But Palm's Treo has proved popular. Last week, Palm reported that it shipped 470,000 Treos last quarter, an increase of 160 percent from a year earlier. Colligan, the chief executive of Palm, said it would continue to sell Treos running the Palm operating system.

Microsoft and Palm must contend with Research in Motion, the Canadian company that dominates the corporate world with its BlackBerry device, as well as Symbian, the software operation owned by a consortium of cellular handset makers. "There's no question this is going directly after the BlackBerry user," Tim Bajarin, an analyst at Creative Strategies, said of the new Treo.

Source: International Herald Tribune

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