Split of Palm Hardware, Software Groups Complete

Posted By: Ed Monday, January 21, 2002 10:03:26 AM

Palm, Inc. has announced that it has finished spinning off into a separate subsidiary the part of the company that creates the Palm OS. This creates a bit of distance between the part of the company that develops Palm's hardware and the part that writes the Palm OS. The other licensees of the Palm OS, like Handspring and Sony, have complained that Palm's own hardware group had too much influence over what went into the operating system, giving Palm-branded handhelds an unfair advantage. This split is intended to reduce that.

The new subsidiary will get its revenue from licencing the Palm OS. Palm's own hardware group will also have to pay royalties to the OS group.

Nevertheless, there have been some questions about whether the OS subsidiary will have enough money to support itself. In the past, Palm's hardware sales have subsidized OS development costs.

Palm itself seems confident, as it has said it plans to totally spin the subsidiary off as a separate company at some point in the future.

David Nagel is in charge of the new OS subsidiary, called the Platform Solutions Group. He said in a prepared statement, "Our continued focus on an excellent user experience, coupled with an efficient operating system, creates a competitive advantage that is hard to match. The formation of the subsidiary provides us with even more opportunities to take the market to new levels."

Mr. Nagel said in the past that he thinks the Palm OS has fallen behind its competitors but he's doing something about that. He said, "When I first arrived a couple of months ago, one of the things that was the highest priority for me was to kick both the apparent innovation and the actual innovation into much higher gear."

The Platform Solutions Group is hard at work creating the next generation of the operating system, OS 5.

Thanks to MadMax for the tip. -Ed

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Apparent vs. Actual innovation?

I.M. Anonymous @ 1/21/2002 11:24:00 AM #
What does this mean? What's the difference?

RE: Apparent vs. Actual innovation?
I.M. Anonymous @ 1/21/2002 11:35:44 AM #
Nagel is working to make sure that OS 5 has much more actual innovation in it than OS 4 did. This means adding important new features. At the same time, he's going to get out the word to everyone he can about all this innovation, raising the level of apparent innovation.

Here's an example. The main improvements in PPC 2002 are fixes for problems in the previous versions, plus some UI improvements ripped off from Palm. But Microsoft has done a great job of convincing people this is "innovation". Their apparent innovation is much greater than their actual innovation.

RE: Apparent vs. Actual innovation?
I.M. Anonymous @ 1/21/2002 11:48:21 AM #
That the hardware dep. which is not ready until 2003 has not to wait for the OS5 which is not ready before end 2002.
I betted my future on Palm OS and invested - I'm assured now by Nagel that I lost everything to a good case.
So far the situation is clear to the sober- what will happen to my shares (besides my palm business) is in the stars.

RE: Apparent vs. Actual innovation?
I.M. Anonymous @ 1/21/2002 11:54:40 AM #
Incorrect. A beta OS5 will go out late this spring. The final version will be ready in September. First handhelds will be out fall. The old slow people who used to run Palm have all "left to pursue other opportunities" (been fired). Nagel and his crew are going to get OS5 done on time.

Spinning off a good idea?

Scott @ 1/21/2002 2:06:55 PM #
I'm not sure how I feel about this whole split to begin with. Sometimes I think Palm, Inc. would have been better off if they kept licensees to a minimum and only licensed to companies that didn't compete directly with them. They make a lot more money off of hardware than licensing the OS. Yet, Handspring ate into their low-end sales and Sony ate into their high-end sales. OTOH, licensing to vertical market manufacturers (Symbol) or cell phone makers (Kyocera and Samsung) make sense.

Unless Palm, Inc. is thinking about become a software company and wireless provider and dumping the hardware altogether, I just don't know about this move.

Scott

RE: Spinning off a good idea?
james_sorenson @ 1/21/2002 2:56:14 PM #
The whole idea of keeping both the hardware and software to yourself while your competitors license out the technology is usually a death-wish. Apple is the only company that has managed to survive with this tactic, and that's only because their systems are pretty revolutionary (Just look at the Titanium Powerbook, iPod, or MacOS X with the unix under-pinnings). Palm used to be like this, but they have slowed down lately. Licensing the software and letting other companies push out some revolution is one way to make sure that the platform doesn't die. True, the licensing of the software will probably cost more in the future, but at least all new features won't be geared directly towards Palm's devices. Sony, Handspring, and others will now have more of a say in what goes into the OS. Even if Palm goes under, the PalmOS group will not die until no companies wish to license it. This is a good thing!


-------
James Sorenson

RE: Spinning off a good idea?
melopsittacus @ 1/22/2002 4:00:44 AM #
Yes, maybe Palm should have been more strict with their liscencing. But that is reasoning based on hindsight. As I understand it, 3 - 4 years ago the decision was made to grow the "Palm Economy" (I don't like this term which Palm keeps bandying about) as fast as possible. I even recall talk of Palm transitioning into a predominately software company. At the time that made sense. Everyone was talking about how Palm had learned from Apple's early mistakes NOT to liscence their OS. Software is where the higher profit margins are...once a certain user base is established, and Palm wanted to establish that large user base and live off its software. BUT the environment that Palm was born into is not the same as the environment that Apple was born in to. The Palm OS has to compete with one of the worlds most ruthless monopolies. The hardware has to compete with computers in general and not just other pocket devices. AND Palm was essentially born into a recession where as Apple was born just after a recession. In short there just isn't as much room as there was for Apple.

So, with hindsight Palm's strategy was mistaken, but it's a difficult call. If Palm had not liscensed their OS so freely, we all know a company that would have eagerly stepped in to do so. And don't forget, Handspring at one point explicitly threatened to move into the PPC crowd. Anyway, the point is what should Palm do now? I suspect that their current strategy is primarily defensive on the hardware front. 1) Hope that Sony and Handspring and Handera provide a rich selection of devices (which they do). 2) Push, push, push into the enterprise where conservative, easy to use devices are going to be looked upon favorably (this is why the i705 is designed the way it is) and 3) Position the software so that it can be easily configured to meet the needs of a balkanized market.

Opportunity for Handspring?

I.M. Anonymous @ 1/21/2002 4:29:45 PM #
This is part of the "things I'd like to see" department, but...

Wouldn't it be nice if Handspring were to buy the PalmOS part of Palm Computing? Then the creators of the Palm and the OS would have control over the software again. All they wouldn't have is the company name they used to have.

I wonder if this isn't what is being set up.

RE: Opportunity for Handspring?
I.M. Anonymous @ 1/21/2002 4:37:18 PM #
Why? They would have less resources that Palm do to a major overhaul of the OS. Also they're on their way out of the PDA market. Jeff Hawkins was a genius when he came up with the Palms, but it's evolved on it's own without him.

RE: Opportunity for Handspring?
I.M. Anonymous @ 1/21/2002 7:58:47 PM #
I echo the "why". Handspring isn't very high on the innovation scale lately either. If we were voting who should head PalmOS dev other than Palm, my vote would go to HandEra. But since we're not, this is probably a good move. With some distance from the hardware group maybe there'll be more listening to and collaboration with the more innovative licencees. And the licencees will get together a bit more so we all can be more on the same page. Personally I'd could handle seeing less of Sony's go it alone fragmented innovation.

RE: Opportunity for Handspring?
I.M. Anonymous @ 1/22/2002 5:29:05 AM #
Handera??? Does this little unknown company has more resources than Palm or Sony? If Palm cannot handle the OS what makes you think Handera can??

RE: Opportunity for Handspring?
mtg101 @ 1/22/2002 6:55:32 AM #
Handspring is a VC backed company. Those VCs will be looking for an exit soon I imagine, and as an IPO looks unlikely, I'd say they'd go for someone buying Handspring.

How about Palm Hardware spin off the SW group, then with the money buy Handspring, and let Jeff and Donna take over again?

Well... I can hope :-)

Cheers
Russell

---
russ@russb.fsnet.co.uk
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Diga ao Falante pelos Mortos
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RE: Opportunity for Handspring?
I.M. Anonymous @ 1/22/2002 6:01:31 PM #
"HandEra???...unknown company..." Follow the thread more closely and stay with us. As all the licencees and even Microsoft's pocketPC shows, it takes more than money to to be a success in the _long_ run. Fail to innovate, or innovate badly and you're on your ear. No one can credibly level a failure to innovate, and do it well accusation at Trg/HandEra. Given time, good people and money circle around good innovation. Money alone only buys short term success. At this point no licencee other that Sony or perhaps Garmin has the cash even consider a Palm take-over, and I don't think it's in the interest of either of them to attempt to. In either case it would likely be the death of the PalmOS. All things considered, it'd just be good for Palm to actively listen to the good PalmOS licencee ideas out there, facilitate more collaboration from the licencees on the path ahead, and refuse to adopt the ill-conceived ideas of some licencees regardless how much money that licencee might put behind it.

RE: Opportunity for Handspring?
I.M. Anonymous @ 1/23/2002 5:48:15 PM #
HandSpring IPO'ed already, what you talking about?
VC's might have their time to be close to be ALLOWED to sell all of their stuff, but I reckon they would stick to it for next 12-18 month before economy picks up,

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