Palm readies Linux platform for future smart phones

April 10, 2007 (IDG News Service) -- Palm Inc. 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 smart phones, CEO Ed Colligan said today.

Palm will also continue to use Microsoft Corp.'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 smart phones, Colligan said at the company's annual analyst and investor day in New York.

Since Palm developed the original PalmPilot handheld organizer in 1996, the company has come to rely heavily on the Treo smart phone as its top seller, available as the 700w (running Windows), 700p (running Palm OS) and other models. Compared with handheld sales, Palm has increased its smart phone revenue from 28% in the third quarter of 2004 to 86% 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% 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 rumors have suggested that either Motorola Inc. or Nokia Corp. would buy the company, but those whispers died down when Palm reported on March 22 that its third-quarter profit was $16.5 million, down from $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 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 company Iventor Inc.

Colligan also 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 smart phones from competing products.