PalmPilot team makes new run at handheld market
San Francisco Business Times - by Adam Feuerstein Business Times Staff Writer
When Jeff Hawkins, Donna Dubinsky and Ed Colligan departed 3Com Corp. last fall to start their own company, the computing industry stood up and took notice.
After all, this wasn't just three restless technology veterans following the familiar path to their own entrepreneurial odyssey. The trio were key members of the team that invented the PalmPilot, one of the most successful computing products ever launched. Now they're setting up an office in Palo Alto for their new company, Handspring Inc., to build the next generation of handheld computers.
"We built Palm into a very successful company and left on good terms, but we felt that forming our company gave us the autonomy we need to control our own destiny," said Colligan, Handspring's vice president of development and marketing.
It's safe to say that because of the trio's Palm days, millions of consumers threw their paper calendars in the trash and slipped sleek, easy-to-use computers into their pockets.
Launched in 1996, PalmPilot allows users to organize phone lists, e-mail, business and personal contacts, calendars and to-do lists from a small touch screen that easily links to their desktop PC. The device controls 77 percent of the market for handheld computers. In 1998 alone, 1.4 million units were sold, according to market research firm International Data Corp. A new, slimmer Palm V hit retail shelves in February and the Palm VII, due out later this year, adds built-in wireless e-mail and Internet access.
In 1998, competitors tried to muscle in on Palm's turf. Several computer makers entered the market with devices based on a slimmed-down version of Microsoft's operating system, but so far have only garnered a 15 percent market share.
Handhelds, whether they be built around the Palm or Microsoft platform, are getting more sophisticated, and faster. It won't be long before consumers will use handheld devices to make phone calls, check e-mail and surf the web at lightning speed. Many computing industry watchers refer to this next generation of handhelds as "Internet appliances."
So where does Handspring fit in? The company has been remarkably secretive about its plans. Colligan will not talk about any technology or functions being incorporated into their handheld device, expected to roll out later this year. The only thing he will disclose is that Handspring has not severed its ties to Palm completely. The device will be based on the Palm operating system and be fully compatible with Palm software.
"We're only at the very beginning of the handheld market, so there is an awful lot of room to grow," said Colligan. "We feel the pressure because of our past success but we'd rather under-promise and over-deliver."
Hawkins, Dubinsky and Colligan are getting a lot of support to pull off their second computing success story. Handspring is backed by two venture capital heavyweights -- Kleiner Perkins Caufield & Byers and Benchmark Capital. Combined, the two firms have backed the likes of Netscape, Amazon.com, At Home Corp., America Online and eBay. Benchmark was also an original backer of Palm Computing.
"We're thrilled to be backing the Handspring team," said Kleiner partner John Doerr, who sits on Handspring's board. "We missed the opportunity last time when this team sparked the handheld computing revolution. This is a rare second chance to lead the next generation of computing."
Naturally, 3Com is happy that Handspring remains in the Palm camp.
"We are delighted that the Handspring team will be focusing their energy building products based on our market-leading Palm Computing platform," said 3Com executive Janice Roberts, who recently stepped down as acting president of the Palm division.
"The Palm platform is the standard in the handheld industry, and we are continuing to strategically license it to influential players who can help us extend our market position."
The battle among makers of handheld computers comes as the mobile communications market is entering its next phase of growth. Major players in the wireless telecommunications, computing and cell-phone industries are hooking up to create the technology standards for all-in-one handheld devices that combine the features of a cell phone, personal organizer and web browser.
An increasingly mobile work force is driving the wireless computing trend. About one-third of U.S. workers currently spend at least 20 percent of their time away from their primary workplace. These mobile workers need a way to stay connected to corporate networks and their colleagues.
Eighty-seven percent of the 100 largest U.S. companies are using the Internet, specifically intranet applications, to keep mobile workers connected. However, most of these systems connect remote company locations rather than individual workers, according to information technology research firm the Yankee Group.
Truly wireless voice and data systems are still too slow and too expensive. But advances in handheld technology coupled with new high-speed wireless networks are changing that. Yankee Group predicts that 33 percent of large U.S. corporations will be providing mobile workers with wireless intranet access by the year 2000.
Handspring's Colligan says obsession with standards and wireless telecommunications platforms is useless unless the end result is a great product that is easy for consumers to use.
"The future of the handheld market will include a great many products each focused on a particular market, whether it be business people, students or vertical applications like health care. In the next five to seven years, we believe consumers will be buying more handhelds than PCs."
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