Beyond Binary

PASADENA, Calif.--Sprint CEO Dan Hesse has a lot to say about the mobile operating system he held off on--Android--and not so much about the phone he has backed, Palm's Pre.

At Fortune's Brainstorm: Tech conference here on Friday, he said that he's limited on what he can say about how the Pre is doing because Sprint reports earnings shortly.

Sprint CEO Dan Hesse (center) speaks with Fortune's Jon Fortt (left) at the Brainstorm: Tech conference, along with Qualcomm CEO Paul Jacobs (right).

Despite that, he told the audience that the primary constraint for selling the Pre has been the number of devices that Palm has made--not demand for the product, he said.

"There have been shortages of the device," Hesse said. Realistically, he said, Sprint won't know if it is a hit for three or four months. "It's too early to tell."

Hesse also said that Palm Pre returns aren't as high as people think.

"There's things all over people are speculating," Hesse said. "Most of the speculation I read is wrong."

As for Android, Hesse said his company is a big supporter of the operating system, but is glad the company waited until the second version of the Google-backed operating system.

"The reviews say now it's ready for prime time," Hesse said. "It wasn't when it first came out."

Hesse said Sprint will have at least one Android-based device for sale this year.

Palm showed the Palm Pre's rival to the App Store during its demo at D: All Things Digital on Thursday.

(Credit: Ina Fried/CNET)

CARLSBAD, Calif.--In one of the more anticipated chats at D: All Things Digital, Palm Executive Chairman Jon Rubinstein showed off the Palm Pre and talked about several features of the smartphone for the first time.

Rubinstein showed how the device can search Amazon's MP3 store and download songs directly to the device, a feature mentioned at the Pre's unveiling at CES in January. The Pre is scheduled to go on sale June 6 with a price tag of $199.99, after rebate.

He also showed a "media sync" feature that lets users grab nonprotected media files directly from iTunes without any special software. In addition, the universal search feature will not only search Google and Wikipedia, but also Twitter.

Palm also demoed an App Catalog that the company says will launch with the product in beta form. About a dozen programs will be there at launch, Palm said. Among the applications shown on the device were Fandango and the New York Times.

D impresario Walt Mossberg pressed Rubinstein on whether iTunes maker Apple will be unhappy with the feature. "They've gotten much more open," he said. "They've gotten rid of the DRM."

Venture capitalist Roger McNamee, whose firm is Palm's biggest shareholder, said he sees the media sync feature as an acknowledgment of iTunes' power.

"I find it hard to believe they are going to get bent out of shape," McNamee said.

Rubinstein did acknowledge that the Pre is going after the Apple iPhone, along with the BlackBerry devices from Research In Motion.

"Clearly the primary competitors are Apple and RIM," Rubinstein said of the Pre.

Palm: "a new company today"
Before the Pre demo, Rubinstein talked about the steps that got the company where it is.

"We hired a lot of new people into the company," Rubinstein said. "It's a new company today."

Asked what he brought over from Apple, where he had been a hardware guru, Rubinstein said, "I hope I've learned a little bit of taste. I've also learned how important great marketing is."

But Palm is not Apple, he said. "The difference is we're tiny. We're the real little engine that could."

McNamee said that, despite all their success, Apple and RIM have just two points of market share in the global phone business. "We are at the very beginning of a massive transformation," he said. "There was a lot of white space that Palm could step into."

Mossberg asked why Rubinstein and McNamee didn't just start their own company.

"Palm had tremedous assets," Rubinstein said, noting its brand, its history of innovation, and its intellectual property. "The DNA is there," he said. "The way of thinking about great products is there."

The talk began with a video in which McNamee makes all sorts of exaggerated claims about the Pre and Rubinstein constantly interrupts and corrects him. It's a reference to an earlier incident in which McNamee made claims that Palm later had to publicly disavow in a regulatory filing.

McNamee didn't stop with his hyperbole.

"I wish I had the entire fund in Palm," he said. " This is the thing that will define us."

Long live the OS
Asked about what other devices Palm might create, Rubinstein left the door open, but didn't give details.

"We designed the WebOS to work across a variety of products," Rubinstein said. A lot of thought was put into the WebOS that powers the Pre, he said.

"The old Palm OS lasted 15 years but had run its course," Rubinstein said. "We set out to develop a platform that will last us another 10 or 15 years."

Rubinstein said that Palm initially worked with just a couple dozen developers, but is now working with hundreds and has thousands more waiting in the queue.

As for the devices themselves, Rubinstein was asked to comment on reports that Best Buy stores may each have only four devices for launch.

"We are in full production with the Pre," Rubinstein said, adding that he expected there would be shortages because of the demand.

He noted that later this year there will be a GSM version, but declined to confirm a report that Verizon will start selling the Pre in six months time.

"We do love Sprint and they are our exclusive launch partner," Rubinstein said. "It sounds like AT&T and Verizon both want it. I can't comment on unannounced relationships."

On the enterprise side, Rubinstein said, the Pre not only has ActiveSync to get Exchange mail as well as the ability to look up addresses from a corporate directory and remotely wipe a lost phone. He also acknowledged that the security and other business features of Windows Mobile aren't there, pitching those concerned with that toward Palm's Windows Mobile-based Palm Pro.

Among the Pre featues, Palm showed a media-synching feature that transfers unprotected music directly from iTunes.

(Credit: Ina Fried/CNET)