Magazine

The Whole World in Their Hands


By Stephen H. Wildstrom

PILOTING PALM

The Inside Story of Palm, Handspring, and

the Birth of the Billion-Dollar Handheld Industry

By Andrea Butter and David Pogue

Wiley -- 353pp -- $27.95

Many successful high-tech startups follow a familiar trajectory: After an initial struggle with products and funding, the business takes off. But growth quickly outstrips the managerial abilities of the founders. If it weathers the crisis, professional managers take the company to the next level, and the business makes the transition from startup to enterprise.

Palm Inc. (PALM) should have been so lucky. Although the company has, by any reasonable standard, been successful since the day in 1996 when it began taking orders for the original Palm Pilot, there has hardly been a moment in its history when Palm was not in crisis. Following the departure of founders Jeff Hawkins and Donna Dubinsky in 1998, Palm has had no fewer than five chief executives.

Piloting Palm offers an insider's version of the melodrama. It is told well, albeit in flat prose, by Andrea Butter, Palm's former vice-president for marketing, and tech journalist David Pogue. Much of the tale is well-known to followers of the industry, but Pogue and Butter add welcome detail.

The Palm handheld very nearly never happened. It was conceived by Hawkins at a time when a pen-based computer was about as likely to get a warm reception from the venture capitalists of Sand Hill Road as a new dot-com is today. Just to get the product to market, the founders had to sell the company to U.S. Robotics Corp. It proved an unhappy marriage, but before relations got truly terrible, USR was swallowed by 3Com Corp. (COMS) This brought a new set of problems, as the former USR modem business cratered, followed by a collapse of demand for 3Com's core networking products.

Along the way, Palm had to fight off Microsoft Corp.'s (MSFT) attempt to name a new product the Palm PC, while losing the rights to the Pilot name to an Asian pen company. Yet through it all, Palm sales soared, and an industry was born.

The better Palm did, the more Palm execs wanted control of their own company back. But 3Com's then-CEO, Eric A. Benhamou, wouldn't spin off his most successful operation. Frustrated, Dubinsky quit (announcing, as Butter and Pogue recount, that Hawkins was out, too, without asking him first). They left with the parting gift of a license to build Palm-compatible products. Although they had no clear plans, the duo soon attracted Palm marketing chief Ed Colligan, and most of the engineers who had made Palm what it was, to their new venture, Handspring Inc. (HAND)

The book comes at a critical juncture as Palm, once again without a permanent CEO, is struggling to finish new products vital to its future. Recent months have been tough on everyone in the handheld industry. Although the long-term prospects are bright, it's not clear what the industry landscape will eventually look like. Palm is in the process of splitting itself into two companies--one to sell hardware, the other to license the Palm platform to partners such as Handspring, Sony (SNE), and Samsung. Microsoft and its partners, after several miscues, are turning out excellent handhelds that threaten Palm's high-end business, especially in corporations. Palm has made a bid to buttress its corporate standing with its new wireless i705, but prospects are unclear, especially since the software designed to make it easier for enterprises to manage large numbers of Palms and to forward wireless mail to them won't be ready for months.

Meanwhile, the relationship between Palm and Handspring is odd and getting odder. Palm controls the platform, but Handspring has the creative talent. The authors make clear the extent to which Palm has been living off products that were well under way before Hawkins & Co. left. Indeed, the new i705 is the first significant effort of the new Palm team. Meanwhile, the most important Palm-based product since the original Pilot comes from Handspring: the new Treo Communicator, which combines voice, basic Palm functions, and wireless data into a small, well-designed package. Hawkins has done little to hide his frustration with his lack of control over the core software and Palm's slowness at revising the operating system to allow for faster processors and higher-resolution displays.

Although Butter was one of the few early Palm employees to remain long with the mother ship after Dubinsky and Hawkins left (she has since resigned to focus on a writing career), her sympathies seem to lie with the charismatic founders. The senior managers who followed don't come alive in the book--perhaps because few stayed around long enough to put much of an imprint on the company. And it's hard to care about managers whose muffed product introductions and botched inventories led to ruinous price-cutting.

At the end of the book, the authors fall into a common trap. Their assessment of the fight between Palm and Microsoft's increasingly capable handheld software seems to assume that this is a winner-take-all row. In fact, there is plenty of business to go around. Palm faces some big challenges, particularly pulling off a planned split of its platform and hardware operations into separate entities and the completion of the new operating system. If it can achieve some management stability and maintain its focus, and if Palm and its partners continue to turn out breakthrough products like the Treo, the future may still be bright. Technology & You columnist Wildstrom has been using Palms since he got a preproduction Pilot in 1996.


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