August 30, 2000 9:30 AM PDT

Sony launches much-anticipated Palm device

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Sony, Palm to team on handhelds

November 15, 1999
NEW YORK--Sony and Palm last night unveiled the Clie, the first fruit of their previously announced alliance and the Japanese electronics giant's much-anticipated entry into the handheld computing market.

The basic, monochrome personal digital assistant (PDA) is the first product from Sony since it licensed Palm's operating system last year. Far from a unique take on the basic PDA, the Clie resembles a narrowed Palm V with the addition of a Memory Stick slot and a jog dial for navigation.

The Clie will be available for preorder starting today from the Sony Web site for $399. It will be available nationwide in September. The 4-ounce Clie includes 8MB of RAM and an 8MB Memory Stick, Sony's proprietary portable memory technology. Eventually, Sony plans to offer add-on gadgets like digital cameras, using the Memory Stick in the same manner as the Handspring uses its Springboard expansion slot.

"It's a safe entry--it's not bold, and it's certainly not earth-shattering," said David Thor, a handheld analyst with ResearchPortal.com, explaining that Sony is going after the Palm V customer. "It's a commodity product, going after the higher-end mobile professional market."

Clie, which stands for Communication Link Information Entertainment and is pronounced "klee-ay," is a major part of Sony's strategy to dominate the market for networked home appliances, computers and devices.

"Sony has big plans for the Clie as one of the four gateways to the networked home," Michael Vitelli, president of Sony Electronics, said at the launch event here last night.

The four gateways are the PC, the PlayStation2 game console, the television and Clie, which is expected to eventually feature wireless Internet access.

The consumer electronics giant, which has also licensed the Symbian alliance's operating system for smart phones, will release a color version of the Clie in the United States next year. Analysts expect Sony to eventually release a family of devices that will feature stronger multimedia and wireless capabilities than the Clie.

Palm is the leader in the PDA market, with 60 percent worldwide market share, according to International Data Corp. The handheld maker has aggressively pursued a licensing strategy to expand its business, signing up high-profile companies such as Sony, Handspring and Nokia.

The strategy, designed to add a new revenue stream for Palm through operating system royalties, has taken away some hardware market share from the PDA maker. Handspring, for example, has taken 20 percent of the retail market in its first three months on store shelves, according to market researcher NPD Intelect.

"Does Palm really worry if their licensing business is healthy? That's the highest-margin thing they can do," ResearchPortal's Thor said, noting that Palm's hardware side is being threatened on all fronts by its licensees. "There are products from Sony creeping into the high end and products from Handspring creeping into the low end. And as soon as Nokia and Ericsson start to manufacture devices that tread on the space Palm lives in, then they start to have a real problem."

The relationship between Palm and Sony, which has been rumored to be somewhat rocky, is quite strong, according to Palm vice president Mark Bercow, who pointed to his presence at last night's launch event as proof. "Sony has executed beautifully," Bercow said in his remarks. "We share a common vision."

The consumer electronics maker has not sold any type of handheld product in the United States since it pulled out of the U.S. cell phone business last year. Still, the company that invented the Walkman and Discman portable music players believes it knows how to succeed in the mobile gadget market. "Sony has the vision, the resources and the content to realize this vision," Vitelli said. "Sony also has the brand."

Sony may be relying heavily on brand to sell the device, which in its first version offers no obvious or meaningful hardware enhancements over existing products. Sony's original plan to release two versions of the device, one with a monochrome display and one with a color display, was scrapped because of shortages of the necessary components used in color devices.

Clie eventually may feature a reflective color display developed by Sony and used in Compaq's iPaq device, which is based on Microsoft's Pocket PC operating system for handhelds. The iPaq is in extremely short supply and is back-ordered at most online retailers.

"Color displays are rare," said Richard Doherty, president of Envisioneering Group, who expects Sony to ramp up its own supply of displays. "And reflective color displays are the scarcest displays on the planet."

Sony also included AvantGo, an application which downloads Internet content directly to devices, and TrueSync, which synchronizes contact and calendar information from Microsoft Outlook or Lotus Organizer. "The folks at Palm were open to collaborating to extend the operating system," Vitelli said.

Despite the initial absence of a color product, Doherty considered the launch a success.

"It's a win for Palm, and it's a win for Sony," said Doherty, pointing to Sony-specific applications like its Picture Gear Pocket Software, which allows people to add images to contact files.

"I'm very impressed," he said.

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