Low-cost Palm IIIe handheld ships

Palm Computing today introduced the Palm IIIe, a lower-priced device targeted at families and consumers.

The new handheld is Palm Computing's fourth new product this year, joining the Palm IIIx, the slim Palm V, and the wireless Palm VII.

But the introduction of the consumer device could take sales away from the Palm III and Palm IIIx, analysts say, as well as future offerings from start-up Handspring, a Palm licensee. Handspring, started by Palm co-founders Donna Dubinsky and Jeff Hawkins, is expected to introduce a sub-$200 Palm-based device aimed at families and students later this year.

The flurry of activity signifies the aggressive defense 3Com is launching in the face of an all-out handheld assault from Microsoft and its manufacturing partners, which include such heavyweights as Compaq, Hewlett-Packard, and Casio.

Palm-sized devices based on Microsoft's Windows CE operating system are typically more expensive than even existing Palm devices. The new $229 Palm IIIe increases the need for price-competitive Windows CE products, analysts say.

The Palm IIIe is based on the Palm III design, and features the same liquid crystal display used in the Palm IIIx. The device will be introduced at a retail price of $229, the lowest ever introductory price for a Palm device. The Palm IIIe includes 2MB of memory.

Palm predicts that the lower price will broaden the base of Palm users from technology lovers to the mass market.

"The IIIe shows how serious Palm is about increasing its consumer market penetration," according to Brian Philips, a handheld analyst with ARS, noting that other older devices, such as the Palm III, are already available for the same price. The Palm IIIe will be positioned as the consumer counterpoint to the more corporate Palm IIIx, he said.

"However, the $229 price point of the IIIe is still likely to cannibalize some sales that may have otherwise gone to the IIIx. The question is whether the additional market penetration generated through the IIIe will outweigh the lost revenue from customers who would have paid more for a IIIx had the IIIe not been available," Philips said.

The introduction of the Palm IIIe comes in the wake of the abrupt departure of Robin Abrams earlier this month. Abrams surprised industry observers by resigning as CEO of Palm Computing after only 5 months. 3Com executive Alan Kessler succeeded Abrams as CEO. She later turned up as chief operating officer of pre-IPO medical supply e-commerce start-up Chemdex.

Later this year, Palm is also expected to release two updates to the platform's operating system which will enable devices of larger sizes, part of the company's aggressive licensing efforts.