Handspring: Hand-to-hand combat
Pioneer leads PDA maker against Palm and Microsoft for dominance in the handheld market.
By Erik Sherman -- Movers and Shakers, 6/15/2001
| AT A GLANCE | |
| Handspring |
Yes, the world of Hawkins is complex—a technical and marketing yin and yang. His company has fared well to date. But Handspring has major hurdles to leap—such as limited distribution and an OS platform owned by a rival—if it is to dominate the handheld market as Hawkins wants. But why shouldn’t he? It’s a market he believes in.
“Mobile devices are the future of personal computing and the future of Internet access,” Hawkins says. “Figuring out the right products and business models is difficult, but if you do there will be tremendous growth.”
Things have started well. “He went to a million units almost overnight, which is pretty phenomenal,” adding up to 20 percent of the market for handhelds based on the Palm operating system, says Ken Dulaney, vice president of mobile computing at Gartner Group.
Ah, the irony. Hawkins and his two partners, CEO Donna Dubinsky and senior vice president of marketing and sales Edward Colligan, actually founded Palm. After being purchased by 3Com, the trio wanted the group spun-off. Eric Benhamou, now chairman of 3Com, refused, so the three left to form their own company, after which 3Com finally did create a separate Palm company.
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| “Mobile devices are the future of personal computing and the future of Internet access.” |
Hawkins takes a different view. He believes that, unlike the PC platform, customers don’t buy an operating system. “They purchase useful, well-designed, and stylish products,” Hawkins says. As Palm works on its next generation of hardware and operating system, Hawkins asserts that a change in platform will not result in lost customers. “It is an opportunity to attract new customers,” he says. “Palm is continually evolving the OS, and we are happy with the direction they are taking,” which is why the two companies recently extended their technology licensing agreement.
Dulaney agrees with the point. “What [customers are] buying is a fashion statement,” he says. “Whoever’s winning today may not win tomorrow.”
Hawkins’ view also leaves room for Handspring to create its own operating system in time, which it will need to do to truly dominate the market. But even with a fashion imperative, handhelds have practical functions they must fulfill. People want phone numbers, addresses, and to-do lists. Dulaney thinks that Hawkins could build a bridge for customers. “Remember what Microsoft did to Lotus 1-2-3 with Excel?” he asks. “They wrote APIs [application programming interfaces] that brought everyone over from 1-2-3.”
That may be unnecessary. Currently, the desktop PC is the unifying factor. So long as all devices can synchronize with Microsoft Outlook and other PIM (personal information manager) programs, the PC creates transparency, making it easy to switch from one handheld to another.
That makes Microsoft, the power behind the PC, an important ally that Hawkins must keep. At the same time, the Redmond monolith has been pushing Pocket PC, its answer to the Palm. Hawkins claims to be unworried. “For several years now analysts have been predicting that MS will take more and more share of the handheld space,” Hawkins says. “So far they have taken very little. Most of their success has been in vertical markets and custom enterprise applications. We don’t feel a need to react to MS at this time, but will continually review the situation.”
Up until fall 2000, Hawkins’ view seemed realistic. But then came the holiday shopping season, which jumpstarted sales of Pocket PC devices. “As of January 1, Compaq was shipping 100,000 a month,” says Randy Giusto, program vice president at IDC (International Data Corp). “It’s like the crank was turned on big time in the fourth quarter.” And the crank will only turn faster. According to Giusto’s estimations, the Pocket PC will reach roughly a third of total Palm sales by the end of this year. Projections into 2004 place total Palm-compatible PDA sales at 16.9 million, while Pocket PCs are expected to reach 12.7 million.
That would mean a fight in a market where Handspring could easily be outgunned. Hawkins doesn’t think that is a real issue. “When we were at Palm, we successfully competed against Microsoft, HP, Compaq, Sharp, etc., and we did it with a lot less available cash,” he says. “Good products and operational excellence win over time, not spending large amounts of cash.”
But there is a third leg of the business stool: marketing and availability. And that is an area where Handspring is vulnerable. “They aren’t as widely distributed [as their competitors],” Dulaney says. “I was over in Singapore and people were saying they couldn’t find them over there.”
Another vulnerability is in target customer. Handspring has focused in the past on consumers, but it will take business customers to give the company a leadership position in handhelds. That is the main reason for a new relationship with distributor Ingram Micro.
“We added Ingram as a first step in addressing the needs of enterprise customers,” Hawkins says. “It is restricted to that purpose and not general distribution.”
One more question mark on Handspring’s horizon is the competition emerging from cellular handsets. As PDAs and phones merge, especially as phone displays improve, potential customers might be satisfied with a handset only.
“The phone market is going to hit a billion units in about two or three years,” Giusto says. “[The PDA] market is incredibly small compared to the handset market.”
Handspring offers a module that transforms its Visor PDA into a PDA/phone hybrid, but the VisorPhone uses GSM, which is spottily available in the US. As a source in Handspring has said, “I’m not going to say that VisorPhone is blowing off the shelves.” Handspring plans to work on an integrated product, but having neither a significant presence in the cellular market nor its own operating system, it is at a distinct disadvantage.
Still, counting Hawkins out would be foolish. “He’s Versace,” Dulaney says, referring to the legendary fashion designer. “He has an innate understanding of what the end user wants.”
