Palm shakes hands with Microsoft

Former rivals Palm Inc. and Microsoft Corp. Monday unveiled a partnership that will see the software giant’s operating system run on the Treo handheld device.

The companies made the announcement via Webcast from San Francisco where they were joined onstage by Verizon, which will exclusively carry the new Treo smartphone in the U.S. On this side of the border, Palm Canada announced the availability of the Palm Treo 650 smartphone to Bell Canada customers over its 1X digital voice and data network.

“We’re bringing together the best of the Palm computing experience to the Windows platform,” said Palm president and CEO Ed Colligan.

Monday’s announcement marks the first time the device will run on another vendor’s platform since Palm launched it to the market nine years ago. Palm’s own Palm OS traditionally competed against Microsoft’s Windows Mobile. Palm’s Tungsten and Zire handhelds currently run the Palm operating system. No further details were announced as to whether Palm will drop its proprietary OS from its lineup completely.

Palm sold nearly half a million Treos last quarter to end users worldwide, according to the company.

Three years ago, Palm spun off its software division as an independent company called Palmsource Inc., which was recently acquired by Japanese company Access Co. for just over US$320 million. That was one of the primary reasons for partnering with other companies, said Colligan.

“There’s been a lot of speculation about this relationship,” he said. “In fact, it’s probably the worst-kept secret right now in the world because we’ve been working on this for a number of years.”

The deal also helps both companies better compete against Research In Motion’s Blackberry device, which currently has 2 million subscribers, according to SeaBoard Group analyst Iain Grant.

“Palm is looking to build market share and to break into the RIM stronghold,” said Grant. “To do that they have to have some pretty serious partners.”

Microsoft has struggled to challenge the Palm OS by putting Windows Mobile on Pocket PC devices such as HP’s iPaq, and has also developed an OS, Pocket PC Phone Edition, for the smart phone market which is dominated by the Symbian OS controlled by a consortium of companies including Nokia.

“Everything Microsoft touches in this world has not turned to gold, but they keep trying,” Grant added.

Bill Gates, Microsoft chairman and chief software architect, pointed out while there’s a demand for this product out there, the market is still relatively untouched.

“This is a high growth market,” said Gates, adding that every professional will have a phone that connects up with their e-mail and works with Exchange, Outlook and Office.

“The total market today is not very well penetrated.”

Gates said there are currently 130 million Exchange users, of which 15 million have some type of mobile mail. Blackberry users account for roughly a third of that number, he said.

Colligan said the partnership brings fundamental new functionality to Palm customers.

“There are millions and millions of customers around the world that would love to use that familiar Windows experience,” he said.

The Palm Treo 650, for example, combines a mobile phone with e-mail, an organizer, messaging and Web access. It also includes Bluetooth technology that allows users to connect wirelessly with other compatible Bluetooth devices, an MP3 player and a digital camera.

Canadian pricing details are available through Bell Mobility dealers, retailers and value-added resellers.

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