Handspring’s Focus on Treo Concerns Makers of Visor Expansions By Greg Chang http://quote.bloomberg.com/fgcgi.cgi?ptitle=Technology%20News&s1=blk&tp=ad_topright_tech&T=markets_bfgcgi_content99.ht&s2=ad_right1_technology&bt=ad_position1_technology&middle=ad_frame2_technology&s=APFeoPBbNSGFuZHNw Mountain View, California, Jan. 30 (Bloomberg) — Mark Johnson took a second mortgage on his home to fund his six-person company’s development of a music player and a modem for Handspring Inc.’s Visor handheld computer. Now, he’s concerned that the investment will never pay off. Handspring on Jan. 15 said it plans to drop the Visor to focus on the new Treo, a device that combines the functions of a cell phone and a handheld computer. “I’ve got a knot in my gut,” said Johnson, chief executive of Port Ludlow, Washington-based Shine Micro Inc. “We’re upset and disappointed to say the least.” Johnson and other makers of Visor expansion cartridges, or devices that enable Visors to perform extra tasks, said Handspring’s shift may kill demand for the products. Handspring Chief Executive Donna Dubinsky, who announced the company’s plans on a conference call with analysts, didn’t say when Handspring will stop making Visors. Johnson has dropped plans to introduce an expansion cartridge that would allow Visors to play music. He still will introduce a modem cartridge that allows Visors to connect to ham radios to send e-mail and data. They are the first products Shine Micro has designed and planned to market on its own. Also known as Springboard modules, the cartridges fit into a slot on the back of the Visor. Like cartridges made by other companies, the Shine Micro products don’t work with Treo or any other handheld computer. Treo is smaller than the Visor and doesn’t have a cartridge slot. `Could Stop Tomorrow’ “They could stop building Visors tomorrow,” Johnson said. “We thought we could rely on Handspring and we don’t necessarily feel that’s true anymore.” Shine Micro won’t go out of business because it also does consulting work, Johnson said. Handspring is shifting to Treo to ensure its own survival. The company has lost money since it was founded in 1998 by Dubinsky and Chairman Jeff Hawkins, who invented the Palm Pilot, the forerunner of Palm Inc.’s handheld devices. Handspring had accumulated total losses of $247.2 million as of Dec. 29. To mollify cartridge makers, Hawkins recently sent them a letter saying the company has no immediate plans to halt Visor production. “We will continue to manufacture and sell Visor products as long as there is sufficient demand and we are able to build them,” the letter said. Dedicated Budget Hawkins acknowledged that Handspring is dedicating the bulk of its development budget to the Treo and may discontinue certain Visor models or reduce the number of regions and outlets where they’re sold, depending on demand. Hawkins and Dubinsky declined to be interviewed for this story. Handspring shares have risen more than fivefold since closing at $1.20 on Oct. 8, in part on optimism that Treo sales will help it make money. The shares touched a high of $99.31 in October 2000. They fell 17 cents to $5.67 in regular U.S. trading yesterday. Expansion cartridges are designed to enable Visors to perform more tasks, without making the computers bulkier. There are 63 cartridges listed on Handspring’s Web site. About 500,000 to 700,000 cartridges have been sold, according to a rough estimate from Michael Kim, an analyst at Robertson Stephens. He estimates that Handspring has sold 3 million Visors. Some makers of expansion cartridges take it as a foregone conclusion that Visors won’t be around for long. “We can’t sell our unit unless the consumer has the Visor,” said Steve Lee, general manager of La Jolla, California-based Nexian Inc., which makes global positioning system cartridges that start at $150. “My fear is: when do they basically discontinue the Visor line?” Product Shift Nexian is considering a shift of its own: developing expansion products for handheld computers that run on Microsoft Corp.’s Pocket PC software, Lee said. Hagiwara Sys-Com Co., of Nagoya, Japan, has also stopped working on additional Visor cartridges, said director Mitsuhiro Kamiyama. The company has made several, including the $49 Step Keeper, which calculates the distance walked by the user. Raynet Technologies Ltd., which in October introduced a $99 cartridge that turns the Visor into a personal massager, is working on a battery pack that will power the device for customers who don’t own a Visor. The Singapore-based company doesn’t regret introducing the cartridge because it demonstrated the staff’s engineering skills, said Chief Executive T.C. Pang. “We aren’t upset because we know it’s a business decision,” Pang said. The fate of the Visor is of less interest to companies that market software products on expansion cartridges. Programs can be sold over the Internet or on a CD-Rom. From there, the software can be transferred to a Visor or Treo from a PC. “To some degree we’re a little bit non-partisan as to the type of media our products are on,” said Craig Schmidt, president of Cameron Park, California-based Karrier Communications Inc., which makes Intelligolf software for golfers.