October 12, 1999 1:25 PM PDT

Handspring faces delays, new competitor

A new manufacturer of Palm handheld computers has emerged, while Handspring, its highest-profile software licensee, struggles to keep up with demand for its product.

TRG Products, a privately owned company best known for its memory add-on cards for Palm Computing's devices, will unveil its first Palm-based device at the PalmSource developer's conference next week in Santa Clara, California, according to sources.

TRG's device, which will be marketed to large companies and organizations rather than individual consumers, is expected to resemble a Palm V but offer more memory than existing Palm handhelds, sources say. The new product is also expected to feature an expansion slot for additional memory cards or PC cards which offer additional functionality, similar to the Springboard slot on Handspring's Visor device.

TRG's entrance into the market provides the first competition for Handspring in the Palm clone market. The company declined to comment on specific features of its upcoming device.

Palm, which enjoys more than 40 percent hardware market share, has worked to expand its business beyond hardware sales by creating what it calls a "Palm Economy" of software developers, content providers, and hardware manufacturers which develop products for the handheld device. The company is positioning itself to profit on a variety of devices and products, rather than just from revenues associated with its own Palm-branded product line.

Handspring has been one of the highest-profile participants in the Palm Economy. Started by Palm co-founders Donna Dubinsky and Jeff Hawkins, Handspring announced its first product last month, the Visor. Priced starting at $149, the Visor's most noticeable departure from the Palm III design was the addition of the Springboard expansion slot. Springboard will eventually allow Visor users to purchase add-on cards which add wireless Internet access or digital music players, for example.

Because of its founders' pedigrees and momentum surrounding the launch, observers have speculated that Handspring may one day surpass Palm in terms of units sold or hardware market share. But in the first month accepting orders, Handspring has apparently been overwhelmed by demand for the Visor.

Online sales, originally conceived as the primary way to sell the Visor, were halted recently because of unexpectedly high traffic to the Web site, a company spokesman said. Handspring is currently only taking phone orders, and some customers are reportedly being told not to expect to receive their device before December. Handspring representatives insist the first round of Visors will ship sometime in October, as originally planned.

"Demand had been high, but there have been no manufacturing delays," the spokesman said, denying that any customers have been told otherwise. Online sales will resume "very soon," he said.

TRG's handheld, which is expected to be bundled with corporate software, will be targeted at a different market segment than the more consumer-oriented Visor. But the devices will overlap among some business users and will both compete against devices based on Microsoft's Windows CE operating system as well as Palm-branded products.

"If you look at the enterprise market, any device needs to provide certain standard features like more memory and standard interfaces for common products and services," said Jill House, an analyst with International Data Corporation. The Palm V offers 2MB of memory, while the recently released Palm Vx offers 8MB.

"If you have a backend application, or any sort of deployed application, you need a little bit more space on the device," she said.

Most observers were not surprised that demand for the Visor is outpacing the initial supply. Other hot handheld releases, like the Palm V, Palm III, and Casio Cassiopeia, have experienced similar shortages.

"I don't think they realized how big a presence they are in this industry--the interest and speculation has been growing around this since July of 1998 when [Dubinsky and Hawkins] split off from Palm," House said. "It's a double-edged sword. Some customers are going to be annoyed, but it's only going to fuel more interest in the product."

 

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