With Sony Gone, Is the Palm OS Dead? Not Even Close

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Sure, losing Sony as a licensee outside of Japan is going to hurt the Palm OS. But given the relative stagnation in the PDA market, PalmSource has positioned itself very well to capitalize on growth in other areas like Smartphones. We had a lengthy conference call with PalmSource on Sony, Smartphones and the future of the Palm OS.

 

Our first question to PalmSource surrounded their surprise about Sony walking away from non-Japanese PDA market.  PalmSource was not terribly surprised and could see it coming; they are both understanding and supportive of the decision made by Sony. Sony and PalmSource have been working together for years, they could be called old friends as it were, and that collaborative relationship will still continue. Sony is still going to release new Clie models in Japan with the Palm OS, so it s not as if they re going completely dark.

 

In the grand scheme of things, according to recent numbers, Sony has a 14% share of the US PDA market. While this number is significant, it s not as significant as, say Dell quitting making computers or something of that magnitude. The 14% share won t go away entirely, as Sony sells through current Clie inventory over the next few months. PalmSource is hopeful that buyers looking at Sony will instead go with palmOne, Garmin or another Palm OS licensee. While the Palm OS will certainly not be able to recapture Sony s entire market share, the losses will likely be minimal as many Palm OS PDA owners are actually loyal to the operating system and prefer using it.  In addition to this, the market share losses that occur due to consumers switching to the Microsoft Pocket PC OS could be easily recaptured with future Palm OS devices.

 

How s this recapture going to happen? Smartphone. PalmSource is putting a tremendous amount of faith in Smartphone as their growth vehicle for the foreseeable future. It s not exactly a secret that the Traditional PDA has seen flat sales for nearly two years now, despite palmOne selling millions of their Zire units. It s the Treo family from palmOne and Smartphones from the likes of Kyocera, Samsung and a host of international licensees that are of major interest going forward.

 

Smartphone adoption in the U.S. has struggled to take off in the past for a number of reasons. Primarily, carriers didn t understand the product and how to monetize it and hardware manufacturers didn t make devices that worked on multiple networks. A few recent changes have helped accelerate time to market for new Smartphones. PalmSource started the Palm Powered Mobile World program to the amount of time needed to certify hardware. They ve also spent time educating carriers on how to monetize this new breed of phones, especially in the data transfer arena. To solve hardware concerns, manufacturers like palmOne have focused on making hardware that works on multiple carrier systems, like the Treo 600, so potential buyers don t have to switch service providers to chase the hardware they want.

 

PalmSource feels as if they re well positioned in the Smartphone market going forward. Not just because of the success the Treo 600 has had, but because they re lining up more licensees, members of their development network and Palm OS device buyers than ever. According to NPD, the Palm OS Smartphone market share continues to climb in the US to nearly 50%. In March they had more market share than Microsoft and Symbian combined. While Symbian and Microsoft have both had strong periods of traction in the market, they are both miles behind PalmSource in terms of software titles available.

 

As much as it seems like software titles are roughly equal with at least Microsoft and Palm operating systems, the Palm OS is much easier to develop for, leading to more titles and regular upgrades as the operating system progresses. Microsoft is a moving target with each upgrade and when Symbian announced version 8 of their user interface, they lost compatibility with almost all previous applications.

 

Aside from software, PalmSource feels they have further strength in that they re now in the third generation of Smartphones. They re also signing up new licensees at a quick pace, teaming up with some of the largest OEM s not just in Asia, but in Europe as well. Many new models should hit the US this year, including more from the Treo family, the i505 from Samsung and hopefully many more including the Xplore88 from GSPDA.

 

PalmSource isn t putting all of its eggs in the PDA and Smartphone basket though. They feel the new Cobalt OS is capable of almost anything. With more multimedia features, support for high resolution screens and more flexibility, it s possible we could see a flavor of the Palm OS on devices like Tablet PCs, home computing devices and even notebook computers. While there s nothing on the immediate horizon on these fronts, it s a major part of their corporate strategy to find more markets to deploy the OS into.

 

In the end, it s too bad that Sony had to leave the market. Their exit could be the first high profile indication that the traditional PDA market is a slowly dying one. Smartphones are what PalmSource thinks, and hopes, will be the next big wave. Given tons of market research, sales numbers and the new units announced and rumored, they re probably right. The loss of Sony hurt PalmSource, there s not doubt about that, but their future is still potentially bright and their approach is sound.

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