Palm will unveil a platform before the end of 2007 that runs the Palm OS on top of a Linux kernel, allowing the company to improve the performance and stability of its handhelds and smartphones, CEO Ed Colligan said Tuesday.

Palm will also continue to use Microsoft's Windows Mobile OS, which is in high demand by business customers and global telephony carriers. By continuing to develop applications on both tracks, Palm will extend its ongoing transition from selling PDAs (personal digital assistants) to smartphones, Colligan said at the company's annual analyst and investor day in New York. The event was also webcast.

Since Palm developed the original Palm Pilot handheld organizer in 1996, the company has come to rely heavily on the Treo smartphone as its top seller, available as the 700w (running Windows), 700p (running Palm OS) and other models. Compared to handheld sales, Palm has increased its smartphone revenue from 28 percent in the third quarter of 2004 to 86 percent in the third fiscal quarter of 2007, Colligan said.

Palm does not intend to license the new Linux-based platform to other handheld vendors, but will use it to upgrade the Palm OS, allowing it to handle simultaneous voice and data traffic while preserving its instant-on and instant application-switching abilities, Colligan said.

Those changes will allow Palm to continue a trend of increasing its sales to consumers and small business users, as revenue from enterprise buyers continues to drop off, said Brodie Keast, the company's senior vice president for marketing. Palm is forecasting that revenue generated by enterprise buyers will drop from 50 percent in 2006 to 30 percent in 2009, as the company's share of revenue from small business buyers rises from 20 percent to 30 percent and revenue from consumers increases from 30 percent to 40 percent.

In announcing those plans for long-term change, Palm executives skirted the issue of whether the company might be acquired. Recent industry rumors have suggested that either Motorola or Nokia would buy the company, but those whispers died down when Palm reported on March 22 that its third-quarter profit was US$16.5 million, down from US$19.8 million for the same quarter last year.

Colligan acknowledged the rumors, but dodged direct comment by saying in a question-and-answer period Tuesday that "we're not going to be able to comment on rumor and speculation."

Instead, Colligan described two recent acquisitions that Palm itself has made, paying a combined $19 million over the past quarter for e-mail software client vendor ChatterEmail and hiring certain engineers and technologies from user interface design firm Iventor

Colligan even hinted that he would continue shopping, saying that Palm has built up cash savings that could be used to acquire new software providers to help differentiate Palm smartphones from competing products.

Palm also plans to increase the number of new products it launches in 2007 and 2008, said Mike Farese, senior vice president for engineering. Palm designers have created a reference design for a common smartphone platform, allowing them to slash development schedules even as they save money through high-volume purchases of shared components.

The common platform could also allow Palm to compete better with Apple's new iPhone. Colligan insisted he is taking the iPhone seriously as a competitive threat, but that it will appeal to a slightly different segment of users than Palm products do.

The iPhone will be attractive for customers who are looking for an entertainment platform, but could be limited in the consumer market by its high price and in the business market by its lack of a full keyboard, Palm executives said.