Handspring Succumbs to Palm

Struggling PDA maker Handspring is giving up the fight, this week announcing that the company will be purchased by Palm Inc., the company which spawned Handspring in the first place. After a successful run selling Palm OS-based PDAs in the late 1990's, Handspring saw its market share crushed by the more innovative Palm OS PDAs built by rival Sony, so the company turned to phone-PDA hybrids, which never really caught on with the public.

"The strategic choice of merging Handspring and the Palm Solutions Group of Palm will create the broadest portfolio and the most-experienced leadership team in the industry, fully capable of delivering value to customers, partners and shareholders," says Eric Benhamou, the chairman of Palm, Inc. "And the spin-off of PalmSource \[from Palm Inc.\] will help grow the Palm Economy, attract additional licensees and unlock shareholder value."

Growing the Palm Economy, as Benhamou calls it, might be a tough job. PDA sales dropped 21 percent in the first quarter of 2003, and Palm's market share--still the largest in the industry, but rapidly falling--is succumbing to rivals such as Sony, Hewlett-Packard (HP), and Dell. The most interesting note about this merger, however, is that it sees the return of Palm co-founders Jeff Hawkins and Donna Dubinsky to the company. Hawkins invented the original Palm device, and Dubinsky was Palm's CEO until both left in 1998 to form Handspring; the two left Palm because of political struggles with 3Com, then Palm's parent company. Handspring went on to become the first company to license the Palm OS, and its Visor handhelds were quite popular for a few years. Ultimately, Handspring simply provided incentive for other companies, including Palm itself, to improve their own PDAs, and the Visor was quickly surpassed by devices such as the Sony CLIE and the HP/Compaq iPAQ.

Handspring's transition to the phone/PDA hybrid called the Treo was far less successful than hoped, and the company saw its fortunes and market share sink over the past three years. However, Palm says it will merge the Treo into its product line, giving it an "unmatched portfolio" of traditional and multimedia handhelds, wireless handhelds, and smart phones. I suspect a few companies working with Windows CE .NET would quarrel with that statement, but Palm's portfolio in the Palm OS-based world, certainly, is unmatched.

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