Palm Inc

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PALM INC.

Founded in 1992 by Jeff Hawkins and Donna Dubinsky, Santa Clara, California-based Palm Inc. is a leader in the handheld computing industry. In the early 2000s, the company produced five different lines of handheld computers, also known as personal digital assistants (PDAs), for consumers and businesspeople: the Palm m100, Palm III, Palm V, Palm m500, and Palm VII. Although thousands of different software programs were available for these PDAs from different independent developers, Palm's devices came with pre-installed programs for productivity and managing personal information. These included a calculator, to-do list, memo pad, expense manager, date and address books, games, and more. Users also enjoyed a backlit screen for operating in dark conditions, the ability to send information from their device to other PDA users via an infrared beam, and a cradle that allowed them to synchronize data on their PDA with desktop software on their personal computer (PC) or a corporate network. This synchronization was possible through technology known as HotSync, developed by Hawkins.

Palm has an expansive global reach, selling products in more than 35 countries. According to a July 2001 market analysis and forecast from International Data Corp, Palm held 55.9 percent of the global market for personal companion handheld devices. In the area of handheld operating systems, its global market share totaled 71.8 percent.

Skokie, Illinois-based U.S. Robotics Corp. acquired Palm Computing Inc. in 1995 and made it a subsidiary. At the time, Palm created software—including applications for handwriting recognition and file transfer—for PDAs manufactured by other companies, including Tandy Corp.'s Zoomer PDA. However, soon after it became a part of U.S. Robotics, Palm unveiled its own PDAs. The pen-based Pilot 1000 and Pilot 5000 were released in March of 1996, and were powered by Palm's own operating system, Palm OS. Critics pointed out that Palm's first PDAs were lacking in communications capabilities and didn't include keyboard functionality. However, the Pilot 1000 received PC Computing's MVP Usability Achievement of the Year Award.

The company had an eventful year in 1997, with revenues totaling approximately $114 million. In March, U.S. Robotics introduced Network HotSync technology that enabled users to connect to computer networks or their computer desktops using an optional snap-on modem. In May, Palm became a subsidiary of 3Com Corp. when U.S. Robotics was acquired by 3Com. According to CNET News.com, the deal, which involved $6.6 billion in stock and resulted in a new company with revenues of $5 billion, was "the largest U.S. data networking merger" at that time. 3Com Chairman and CEO Eric Benhamou retained his role with the new organization, and U.S. Robotics Chairman and CEO Casey Cowell was named vice chairman. The year ended on a positive note when the company received awards for its products from InformationWeek and Newsweek. Finally, Palm announced that it would license its Palm OS platform to other manufacturers.

In 1998, revenues increased to approximately $272 million. That year, the company released the Palm III handheld. Palm co-founders Jeff Hawkins and Donna Dubinski also left the company that year. According to Fortune, the two departed "over frustration that 3Com wouldn't spin off the handheld starlet." After leaving, Hawkins and Dubinsky started Handspring, which would evolve into one of Palm's top competitors. Handspring's first handheld product, the Visor, used the Palm OS. Slightly after one year of operations, Handspring had captured 21 percent of the market. Subsequently, Palm's market share shrank from 83 percent to 63 percent, according to Fortune.

Approximately 3,500 loyal developers were creating applications for the Palm OS by the end of 1998. Palm's products remained popular and were being adopted in a variety of new markets including health-care, where doctors used the devices to capture information from patients; and the financial sector, where traders were testing an application that allowed them to view desktop data while on the trading floor. In December, the company won its second MVP Award from PC Computing. However, competition was heating up from Microsoft, which had introduced its Windows CE platform for handheld computers the previous year. A number of manufacturers, including Casio Computer Co., Hewlett-Packard Co., and Compaq Computer Corp., were selling devices powered by Windows CE.

Despite Microsoft's presence in the marketplace, things continued to go well for Palm in 1999. That year, revenues totaled approximately $563 million. The company introduced a bevy of new PDAs, including the Palm IIIx and Palm V (February), Palm VII (May), Palm IIIe (July), and the Palm Vx andPalm IIIe Special Edition (October). It also cemented a number of partnerships with companies like Sun Microsystems, TRG, Computer Associates International Inc., and mobile phone manufacturer Nokia. In the May 1999 issue of Upside, 3Com Chairman and CEO Eric Benhamou described the company's core focus as, "The Internet is just a set of technologies that has made this possible. . . So 3Com is about connecting people to information, and we do it in more ways across more networks than anyone else. We do it for large businesses, small businesses, ISPs, consumers; we do it across wires, across wireless networks; we do it locally; we do it remotely; but the common theme is connectivity."

The Palm VII was especially noteworthy because it allowed users to access the World Wide Web and corporate networks via a wireless connection. Along with the new device, Palm created new technology as part of its Palm.net Web service. Known as "Web clipping," the technology allowed Palm VII users to visit participating Web sites and access the most relevant information from them. (Palm devices were not suitable for viewing full-featured Web pages.) Many leading sites took measures to make their content accessible in this format. Among them were ABCNEWS.com, Amazon.com, ESPN.com, E*TRADE, Ticketmaster, Travelocity, UPS, and The Weather Channel. The new Palm VII also had wireless messaging capabilities. However, to take advantage of these features, users were required to subscribe to Palm.net wireless Internet service.

Around the time it unveiled the Palm VII, Palm was a handheld product market leader. According to IDC, in May 1999 the company held 73 percent of the U.S. market and more than 68 percent of the global market for such devices. In addition to its dominant position, in June 1999 Palm's developer base, which totaled about 3,500 just six months earlier, mushroomed to more than 13,500. Finally, ending the year on a high note, the PalmPilot received Business Week 's Design of the Decade award in the gold category.

Carl Yankowski was named Palm's CEO in December 1999. He was brought in by 3Com CEO Eric Benhamou to improve morale after the departure of the firm's co-founders and manage the company's transition from a hardware focus to a software focus, particularly by licensing Palm OS to other companies. Prior to joining Palm, Yankowski, who graduated from MIT, held positions with several leading companies including Sony, Reebok, and Polaroid.

In 2000, Palm's revenues reached approximately $1.1 billion. Several noteworthy developments occurred during the year. First, the company introduced several new models of handheld computers. It unveiled the Palm IIIc and Palm IIIxe in February, followed by the enhanced wireless Palm VIIx and a new version of the Palm m100 in July. The company's developer base also continued to grow at a rapid pace, reaching 41,000 developers in March; 65,000 in April; and 100,000 in September. In March of 2000, Palm Inc. filed its initial public offering (IPO) and became an independent company traded on the NASDAQ stock exchange. The spin-off from 3Com was officially completed that July, at which time Palm was named to the S&P 500. In addition to going public, other significant events for Palm during 2000 included the acquisition of two companies—AnyDay.com in May and Actual Software in June. Palm also formed Palm Computing K.K., a Japanese subsidiary, to roll out Japanese versions of its products.

A variety of new applications for Palm's hand-helds emerged in 2000. Most gleaned their usefulness from the wireless Internet connectivity made possible by the Palm VII. For example, in January 2000 advertising agency ORB Digital provided its clients with Palm VII devices so they could track the results of their Internet advertising campaigns in real time from virtually any location. By using the agency's ORBit Express 2000 software, users could view a variety of information about their ads, including click-through rates and impressions. Around the same time, a company called Vindigo introduced a free downloadable program that provided users with reviews and directions to New York City restaurants, shopping venues, and movies. Finally, Britannica.com offered Palm VII users access to the content on its Web site through a free program called Britannica Traveler. In addition to manually searching for content, users also could automatically obtain information about their surroundings by taking advantage of the Palm VII's geographical positioning capabilities, which interfaced with Britannica's database.

In 2000, Palm also began to venture into the enterprise market. It introduced HotSync Server software that allowed companies and organizations to manage handheld computers at the network level. Instead of synchronizing devices to an individual PC, users were able to do so with a server, either within the organization at any number of terminals, from PCs remotely connected to the company's network, or via a wireless connection. In fall 2001, Microsoft also was attempting to enter this market.

In 2001, Palm's developer base reached 140,000 and the company's products continued to find new markets as it drew in revenues of approximately $1.6 billion. New product introductions included the Palm m105, m500, and m505. However, Palm was forced to lay off workers due to the worsening economy and declining market share, which slipped from 75.9 percent in April 2000 to 63 percent in April 2001, according to Business 2.0.

In mid-2001 Network World indicated that "next-generation handheld computers" were on the horizon for 2002. Powered by advanced microprocessors, these new devices would have the ability to more effectively process images, sound, and video. According to the publication, Palm was to license part of its operating system to computer chip manufacturers. The decision was viewed as a good one in light of the developments taking place with advanced chips, and was one sign that Pam would remain a dominant force in a highly competitive industry.