Palm Tries to Catch Up to iPhone, BlackBerry With New Smartphone

Published January 12, 2009

| FoxNews.com

Technology pioneer Palm Inc.'s had a rough few years — and is trying to make up for lost time.

On Thursday, the company once famed for innovative gadgets unveiled its first totally new product since the color Treo debuted in 2003 — a completely overhauled smartphone running a brand-new operating system.

It's meant to seize back a share of the market Palm's surrendered in the past half-decade to Research In Motion's BlackBerry and Apple's iPhone.

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At the International Consumer Electronics Show in Las Vegas, Palm executives brought out the Pre, which at first looks like the iPhone with a face dominated by a 3.1-inch touch screen and single button.

But it's got something the iPhone doesn't: a full QWERTY keyboard that slides out from the bottom of the black and slightly curved body.

"We think it's the first device that will automatically navigate the Web," Palm chairman Jon Rubinstein, a former Apple executive, told the audience at the CES unveiling.

In an effort to capture both business and consumer users, the Pre will come loaded with features including Wi-Fi, stereo Bluetooth and GPS, as well as 8 gigabytes of storage space, a 3-megapixel camera and music and video playback.

The Pre also has a variety of sensors, such as an accelerometer so images on the screen will rotate when a user turns the device on its side.

Many of these features are already available on rival phones, including the iPhone, the latest BlackBerry models and HTC Corp.'s G1 that was released in the fall by T-Mobile and Google Inc.

"We think it's the one phone you can use for your entire life and you'll really enjoy using it," Palm Chief Executive Ed Colligan said at a news conference.

Palm has been overshadowed in the last several years by the success of these products — especially by the growth of BlackBerry smart phones among business customers and, since its June 2007 release, of iPhones among consumer users.

According to data from comScore Inc., as of October, Palm devices accounted for about 15.6 percent of the U.S. smart phone market. Some of Palm's smart phones run on its own operating system, while others use Microsoft Corp.'s Windows Mobile operating system.

While third-party phones running Palm's current OS first appeared in the late 1990s, the Treo, first offered by Palm breakaway Handspring in early 2002, defined and dominated the smartphone market for two or three years.

Palm bought Handspring in 2003, but the company wasted time and money trying to market new personal digital assistants as the market for stand-alone PDAs dried up.

Later, it spent millions trying to develop a dumbed-down laptop called the Foleo that could surf the Web but had to have a companion Palm PDA or smartphone to send and receive e-mail. That project was abruptly canceled in mid-2007.

Even worse, Palm spun off its operating-system division as a separate company in 2003 to minimize conflicts of interest vis-a-vis licensees — but the new company, PalmSource, got quickly gobbled up by Japanese software maker ACCESS, which did little to develop the OS.

Palm OS has had a few tweaks and bug fixes since then, but the upshot is that all Treos and other devices that run it have an operating system that's nearly seven years old and wasn't designed to surf the Web, play music or watch video.

While Palm dithered, RIM's BlackBerrys quietly took more and more of the smartphone market as the formerly corporate devices made inroads among consumers.

The Apple iPhone's spectacular debut in early 2007, and its subsequent runaway sales, only demonstrated how out of touch and behind the times Palm was.

The company's been kept afloat for the past 18 months by Elevation Partners, a high-powered private-equity firm that counts rock star Bono as one of its five principals.

Elevation bought 25 percent of Palm for $325 million in mid-2007, a deal that brought in iPod developer Rubinstein from Apple, and last month invested $100 million more.

The Pre will be available in the second half of the year, exclusively on Sprint Nextel Corp.'s wireless network. Palm did not disclose the price.

"Palm bet the company on this, so they had to come through and they did," JPMorgan analyst Ehud Gelblum said to Reuters. "The only drawback is how long is it going to be on sale only with Sprint? It's a smaller addressable market than they otherwise would have had."

The device comes with Palm's new operating system, Palm webOS, which the company also debuted Thursday.

It's meant to connect various applications — for example, it will automatically synchronize contacts stored in Facebook, Gmail and Outlook, strip out duplicates and present the information in a master list.

Applications developed for Palm's older operating system will not work on the new platform, Colligan said in an interview.

Palm has been working on the new phone and operating system for "more than a couple years," Colligan said, and they represent "a complete reinvigoration of the company."

"We're really re-launching Palm to some extent," he said.

In addition to the Pre and the new operating system, Palm showed off a unique accessory on Thursday — a wireless charger for the Pre called the Touchstone. When a Pre is placed on top of it, the gadget powers the phone through induction.

FoxNews.com' Paul Wagenseil and the Associated Press contributed to this report.

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