PocketPC steals the show, as Palm fades

Any doubts about Microsoft Corp.'s dominance in the handheld device market appeared to be answered last week at one of the leading showcase events for companies doing battle in the mobile software and hardware space, but industry pundits warn that in a rapidly changing wireless space Palm Inc. is not dead yet.

Almost every company demonstrating its products at the DemoMobile conference here picked Compaq Computer Corp.'s iPaq handheld device running Microsoft's Pocket PC operating system to show off its wares to the media and potential investors. This trend marks a strong departure from last year's event, where devices using software from Palm stole the show.

"From last year to this year, there has been almost a complete flip-flop," said Chris Shipley, executive producer of the Demo conferences.

During last year's conference most vendors used a Palm device or a product made by a Palm OS licensee to show their products to potential customers and investors, but this year a rise in the popularity of the Microsoft platform caused a major shift in the handheld market, Shipley said. Microsoft's attempt to bring its PC software down to a smaller device appears to be winning out over Palm's focus on simplicity.

Although few people here would count Palm out, most companies agreed that the flash of a sleek iPaq device coupled with Microsoft's striking OS made the best combination for hawking their mobile goods.

"Palm has a lot of things they need to do," said Ronald Spears, president and chief executive officer of Vaultus Inc., one company using an iPaq to show its wireless enterprise software management product.

In particular, Palm has been slack with its support for the popular Java language on its devices, Spears said. Several companies are building tools to help run Java applications on Palm, but not soon enough for the companies here. Although Microsoft has pulled back on its support for Java as well, the hardware makers using Microsoft's OS have several options to install Java support in their products.

In addition, Compaq simply made a better looking product that was marketed well, Spears said. A rich, color operating system on a shiny aluminum device with a bright display shows off Vaultus' applications better than any other handheld, he said.

Palm still maintains a larger presence in the consumer space than does its rival, but the attractiveness of the iPaq had enterprise-focused and consumer-focused companies alike using the Compaq platform to demonstrate their products.

Although Palm's presence at the show and its recent financial condition appear grim, the same people touting Microsoft said the battle between the two vendors is not over yet and opportunities remain for both.

"It is a war that will be waged for a long time to come," Demo's Shipley said. "It is way too premature to beat the death knell for Palm at this time."

Palm's recent acquisition of operating system maker Be Inc. and its decision to spin off its operating system division could provide the spark the company needs, Shipley said.

Be had success making an operating system and other software for Internet appliances. Be's work with multimedia applications on the appliances could jazz up Palm's staid image and add a new layer of personality to the Palm OS, according to Shipley.

Improvements in bandwidth on wireless devices and new handheld-based software services could also create a new type of market open to any of the major players able to predict industry trends, said Steven Stenton, former head of Symbian Ltd.'s smartphone division.

"Whoever gets the services picture right, whether they sell a clunky device or whatever, will fly," he said. "If Palm can advance its operating system and integrate communications technologies into the [operating system], they have a fighting chance."

Wireless technologies such as GPS (global positioning system) and wireless devices that are always connected to the Internet should create new opportunities for all the handheld software and hardware makers, Stenton said.

By delivering interesting location-based services or solid applications that take advantage of constant Internet connectivity, such as automatic synchronization, a company such as Palm could regain its promise in the mobile space, Stenton said.

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