Microsoft refuses to hand it to Palm as PDA battle intensifies

Tim Bajarin sizes up the leading contenders in the handheld market, the next major battleground. Could Microsoft's pole position...

Tim Bajarin sizes up the leading contenders in the handheld market, the next major battleground. Could Microsoft's pole position in the corporate sector be decisive?

Over the last couple of years, the PDA has become the latest toy of the technology crowd and has emerged as one of the hottest selling products in the market. Although sales of PDAs have cooled during the current economic downturn, they are still on track to become the new battleground, and currently two camps are being established.

Many vendors realise that PDAs could eventually outsell PCs and some day become the one piece of technology everyone could carry with them anywhere they go. In the world of PCs, Apple actually introduced the first commercial PC and tried to make it the industry standard, but in the end, Microsoft won the standards war with its Windows operating system. A similar scenario is taking place today with Palm leading the original standards battle via its Palm operating system, but Microsoft coming up fast with its own Pocket PC platform. More importantly, if Microsoft has its way, it would like to do to Palm what it did to Apple and end up with the Pocket PC getting the major portion of the PDA market.

Sewn up?
As little as 18 months ago, it appeared that Microsoft had almost no chance of encroaching on Palm's strong industry position and gaining any serious PDA market share with the Pocket PC. But in the last 12 months, Microsoft has not only gained ground, it is now posing a real threat to Palm's present market position. With the help of Compaq, HP, Toshiba, Casio and a few new partners soon to be announced, it is starting to eat into Palm's market share and some analysts believe that Microsoft could perhaps become the platform of choice for the majority of PDA users in the future.

How could Microsoft make such a serious run at the market this late in the PDA game? Well, the first thing it is doing is taking aim at corporate users where they have two key advantages over Palm today. The initial advantage comes from the way the Pocket PC interacts and interconnects to Microsoft-based servers and applications and seamlessly integrates within IT environments. The Pocket PC is based on Windows CE, which includes core operating system components that work well within the mainstream Windows operating system. It also includes applications like Pocket Word, Pocket Excel, Pocket Outlook and Pocket Internet Explorer, all designed to synchronise easily with their software counterparts on Microsoft-based desktops and servers.

The second advantage has come through a partnership with Compaq and Compaq's strong presence in corporate markets. Compaq has been able to sell its iPaq Pocket PC as part of its corporate server and desktop offerings and make use of its ability to service and support the Pocket PC as a part of its overall corporate programme. Also key to Microsoft's strategy are new Pocket PC offerings from HP and Toshiba that also take aim at corporate markets.

The particular emphasis on selling PDAs to business users is a critical strategic move since this market segment is starting to realise that a PDA can be an important mobile extension of corporate desktop applications. In fact, in some cases, a PDA can even provide actual mobile applications and systems to field and sales personnel that serve as extensions of corporate applications. The approach could serve Microsoft and its partners well and is going a long way towards helping them gain ground in the PDA platform wars with Palm.

Last month, I spent two days at a Pocket PC technology forum for analysts and looked at a new and even more powerful version of the operating system that was unveiled in early September, called Pocket PC 2001. It takes greater advantage of the next generation of processors that will be used in future Pocket PC products. Microsoft has another weapon in the PDA wars, in the shape of a set of programming tools that make it even easier to create powerful applications aimed at business users. It also showed off products that make integration of various wireless technologies into the Pocket PC platform itself easier, thus allowing hardware vendors to be much more creative in the way they develop and integrate wireless technology into next generation versions of their Pocket PC PDAs.

Not standing still
The downside of this strategy is that there is a mainstream consumer and education market for PDAs developing and, to date, only Casio has developed products that take aim at a segment that is much more price sensitive and looks for a more creative set of offerings.

Meanwhile, Palm and its partners are waking up to the fact that business users represent the next major market for PDAs and they are not standing still and letting Microsoft go after these users without a fight. They are also in a good position in terms of providing PDAs that speak to the needs of the high end of the market, as well as price-sensitive mainstream users.

Palm has developed major partnerships with Siebel Systems, SAP, PeopleSoft, Oracle and many other key corporate software vendors in which Palm devices are tied directly to the enterprise application. And a recent partnership with PriceWaterhouseCoopers gives it a serious sales and support force to help land more business customers.

Palm is also close to introducing devices that use the newest version of Intel's StrongARM processor, which should help it be more competitive with the upper end of the Pocket PC platform.

Furthermore, a recent move by Palm could actually give it a leg up on the Pocket PC in terms of operating system prowess. It recently bought the BE operating system, which is an incredibly powerful OS that delivers new multimedia and multi-tasking features that will allow it to do many new things within a handheld platform. This operating system came to the PC desktop market too late to have an impact on traditional PCs, but when applied to other devices like a PDA, it is a major OS contender. More importantly, it gives Palm a new OS architecture to build on and gives it the option of moving into other device categories in the future.

Palm recently made a significant appointment that I believe will have a major impact on its ability to make the next generation Palm OS more powerful and highly competitive. David Nagel was previously the chief scientist running AT&T's technology labs, and will now head up the Palm OS venture that is spinning out of Palm early next year. Nagel was at Apple when it moved the Mac OS from one processor core to the next and was critical in helping Apple develop its next generation OS in the early 90s. He is a brilliant software engineer and proven manager and will be a major asset as Palm moves to shore up the Palm platform and try to keep Microsoft and the Pocket PC gang from gaining any more ground.

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