March 27, 2000 1:45 PM PST

Handspring to hit retail shelves

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Handspring will begin selling its handheld computers in retail stores, the company said today, a significant milestone for the start-up.

Handspring, which was launched a year and a half ago by Palm co-founders Donna Dubinsky and Jeff Hawkins, has sold its devices through its own Web site since last September. The start-up struggled with e-commerce software glitches and customer service complaints, with many customers reporting shipping delays and botched orders.

Handspring has largely straightened out its online sales situation, company executives say, and has now turned to the more traditional retail sales channel. Handspring's Visor, along with Springboard add-on cartridges, will be sold at CompUSA, Best Buy and Staples next week. Handspring had been expected to enter the retail channel earlier this year, sources have said.

Matt Sargent, an analyst at ARS, concurred that the company has largely rectified its earlier supply issues, but the entry into retail will tax the Handspring's ability to keep up with demand.

"Most (retailers) will pick them up. The question is whether they can supply those channels," he said. The telling challenge will be whether Handspring can keep up with its customers for at least two weeks after the foray into retail, he added. Most likely, the company will limit the number of retailers.

The devices will be sold for $179 and $249 for the Visor and Visor Deluxe versions, respectively. The Visor Solo will only be sold through the Handspring Web site. Otherwise, retail pricing will be consistent with Handspring's own online sales, according to the company.

"Retail is very important for us," said Greg Woock, vice president of North American sales for Handspring. The Visor and Handspring's own Springboard cartridges will only be sold online through Handspring's Donna Dubinsky own Web site, and not through the online arms of any retailers, he said. "Retail is still where most products are bought and sold, although the Internet will still be our primary market."

The Visor is based on the Palm operating system and generally resembles a Palm device, with the addition of the Springboard expansion slot, which allows users to easily upgrade the product. Current Springboard cartridges in the works include a variety of games, a global positioning system, a digital camera and a digital music player.

Because the benefits of the Visor are so integrally tied with the Springboard cartridges, many analysts have predicted the product will do better in traditional retail stores, where customers can play with each device and more fully understand the features.

However, only the modules actually made by Handspring, which include backup storage, extra memory and a game, will initially be available at retail stores, said Woock.

"The modules are very important, obviously, because they're one of the key differentiators that we've got," he said, explaining that it will be virtually impossible to offer all the Springboard cartridges in stores. "The reality is that there's going to be so many of them by the end of the year, it's going to be retail Darwinism to see what succeeds.

How many and which cartridges are available is a key selling point--and a potential hurdle for the company, analysts say. The Springboard feature clearly differentiates the product from other handheld devices, but it may be difficult to convince retailers to offer more than one or two at most.

Further, the Visor will compete head-to-head for shelf space against Palm devices and PDAs based on Microsoft's Windows CE operating system.

For example, Microsoft's Pocket PC, which is set to be released in wide distribution on April 19, will include digital music and video support integrated into each device, unlike the much-cheaper Visor, which requires the Springboard cards to offer those features. In addition, both the Palm IIIc and the Pocket PC offer color displays, a feature Visor is expected to offer in later versions.

"There's going to be a huge market for handheld computing products--that market has just begun to be penetrated," Woock said, dismissing the argument that the Visor competes directly with Palm or Microsoft devices. "We're selling an organizer running the Palm OS, but one that allows you the ability to extend the hardware or software functionality."

Handspring will continue to sell the Visor and Springboard cards on its own Web site, although the company has not announced any plans to sell through other online retailers.

 

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