Palm will unveil a platform before the end of 2007 that runs the Palm operating system on top of a Linux kernel, allowing the company to improve the performance and stability of its handhelds and smartphones, chief executive Ed Colligan said.
Palm will also continue to use Microsoft's Windows Mobile operating system, 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 personal digital assistants (PDAs) to smartphones, Colligan said.
Since Palm developed the original Palm Pilot handheld organiser 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 operating system) and other models. Compared to handheld sales, Palm has increased its smartphone revenue from 28% in the third quarter of 2004 to 86% in the third quarter of 2007, Colligan said.
Palm does not intend to licence the new Linux-based platform to other handheld vendors, but will use it to upgrade the Palm operating system, 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% in 2006 to 30% in 2009, as the company's share of revenue from small business buyers rises from 20% to 30% and revenue from consumers increases from 30% to 40%.
In announcing those plans for long-term change, Palm executives skirted the issue of whether the company might be acquired. Recent industry rumours 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 $16.5m (£8m), down from $19.8m (£9.5m) for the same quarter last year.
Colligan acknowledged the rumours, but dodged direct comment by saying in a question-and-answer period on Tuesday that "we're not going to be able to comment on rumour and speculation."
Instead, Colligan described two recent acquisitions that Palm itself has made, paying a combined $19 million (£9.5m) over the past quarter for email 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.
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