Palm prepares pair of color handhelds

Palm is expected to announce two new color handhelds in the coming weeks, sources say.

One handheld, the m515, is expected to replace Palm's current high-end m505 and will be priced similarly at $399, according to sources. The other handheld, the m130, is expected to cost approximately $280.

Palm is expected to announce the devices March 4, sources said, but product launches have been known to change because of last minute hiccups.

CompuSmart, an online Canadian retailer, leaked information about the new handhelds Wednesday morning. Those details were quickly pulled from the site, but not before handheld enthusiast sites grabbed information about the new devices.

A CompuSmart representative declined to comment, and a Palm representative also declined to comment.

If consumers take to the new higher-end handhelds, Palm may be able to increase the average selling price of its devices across the board. Palm said in its second-quarter financial report that the average selling price of handhelds fell to $164, compared with $227 in the previous quarter and $212 in the same quarter a year ago.

Both devices come with a 16-bit color screen and a Secure Digital expansion slot. The m130 includes 8MB of memory, while the higher-end m515 includes 16MB of memory.

Needham analyst Andrew Scott said the new line might help give Palm the energy to get its business ship back on course, after a tough year in 2001 from competitors and the overall market. Scott said the m130 could attract first-time buyers, as Sony's color handhelds are more expensive and Handspring's only color model is the aging Visor Prism, which sells for around $300. However, Scott added that price will always be an issue in the handheld market.

"I think this product becomes much more interesting after three to six months and the price starts falling," Scott said.

Scott also raised questions about Palm's ability to transition to the newer models. The company was not so successful with its m500 and m505 line. Palm had announced the m500 and m505 before the devices were available, which slowed demand for older units and made worse an existing inventory problem.

The company recently released its i705 wireless device and is in search of a new chief executive for its hardware business. Recently, Palm created a subsidiary for its operating system unit, PalmSource, headed by David Nagel.