Palm Founders To Return Home

Author Thomas Wolfe said that you can't go home again. Well, it seems Mr. Wolfe was wrong -- at least when it comes to Palm's founders, Jeff Hawkins and Donna Dubinsky. Today's announcement that Palm will be acquiring Mr. Hawkins and Ms. Dubinsky's struggling company, Handspring, and taking them back as chief technology officer and board member, respectively, proves that you can return to the place you once called home, provided the timing's right. And the time certainly seems right for both Palm and Handspring.

After several major stumbles proceeding Mr. Hawkins and Ms. Dubinsky's departure -- some caused by the economy, some caused by poor management decisions -- Palm has seemingly righted its ship. It's retooled both its management and its product line, creating one of the broadest and strongest product portfolios in the handheld industry. That is, except for one area: convergent devices. And that's where Handspring comes in.

Handspring, created in 1998 by Mr. Hawkins, Ms. Dubinsky and its current president and chief operating officer Ed Colligan, has both the products -- its Treo line of 'communicators' combine cell phone and PDA capabilities -- and the know-how. And Handspring certainly knows the ropes when it comes to establishing relationships with wireless carriers, something Palm could desperately use.

But Handspring's major problem is cash flow. It bet the farm on convergence a couple of years back, deciding to quit making PDAs to concentrate on smartphones. While that gamble may prove wise long-term, in the short term Handspring has suffered. By abandoning its primary revenue stream -- sales of PDAs -- Handspring banked on the convergent device market exploding. It didn't. While few dispute that convergent devices are the wave of the future, that future has been slow to arrive. And Handspring doesn't appear to have the funding to stay in the game until it gets here.

So why did Mr. Hawkins and Ms. Dubinsky, and eventually Mr. Colligan, leave Palm in the first place? Well, it's a simple story. Mr. Hawkins and Ms. Dubinsky found Palm in 1992. But by 1995 they realized they'd need a partner (preferably a well capitalized partner with retail product distribution experience) to get their product, the Palm Pilot, to market. Convinced they'd retain operational control of Palm, they agree to be purchased by modem-maker U.S. Robotics. Everything was fine until 3Com came along two years later and swiped up USR. 3Com's corporate bureaucracy stifled Mr. Hawkins and Ms. Dubinsky and they lobbied CEO Eric Benhamou to spin-out Palm as a separate company. He declined. Frustrated, Ms. Dubinsky resigned in 1998 taking her business soul mate, Mr. Hawkins, with her. Looking to recapture the entrepreneurial magic they'd had back in the early days of Palm Computing, they launched JD Technology (eventually renamed Handspring). Oddly enough, 3Com eventually spun off Palm in 2000.

In the new arrangement, Ed Colligan will lead one of the two business units of the merged company, the smartphone solutions unit. Ken Wirt, Palm Solutions Group's current senior vice president of sales of marketing, will oversee the handheld computing solutions unit. But before all of this merger stuff, Palm must spin-out PalmSource, its subsidiary responsible for developing and licensing the Palm operating system, later this fall.

So, what becomes of Mr. Hawkins and Ms. Dubinsky in all this?

Well, Mr. Hawkins, whose true passion is understanding how the brain functions, will assume the role of chief technology officer in the merged company. It's the perfect role for the enigmatic "father of the handheld computer." But with all of its new management he's quick to point out that today's Palm is nothing like the Palm he left in 1998.

"This is not a reunion for me and there is no nostalgia," Mr. Hawkins told analysts and media on a conference call this morning.

Ms. Dubinsky, meanwhile, will serve as a board member. Whether she'll have a more active day-to-day role in the operations of the merged company has yet to be announced.

The moral of this story? While there may be circumstances where you can go home again, don't count on getting your old room back.

Related Links

• Palm Acquires Handspring