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Tuesday, September 27, 2005 - Page updated at 12:00 AM

Palm, Microsoft forge peace with handheld

Seattle Times technology reporter

SAN FRANCISCO — For more than two years, archrivals Microsoft and Palm secretly discussed the idea of joining forces to build a device that ran on the Windows operating system.

That vision took shape yesterday as the two companies unveiled a Treo Smartphone capable of operating on Verizon Wireless' new high-speed network.

Microsoft Chairman Bill Gates, Palm Chief Executive Ed Colligan and Verizon Wireless CEO Denny Strigl showed off the handheld device the day before the start of the CTIA Wireless IT & Entertainment Show, a conference drawing big and small companies in the wireless industry.

The announcement follows the sale several weeks ago of PalmSource to Access, a Japanese company. PalmSource, which was spun off from Palm as a sister company in 2003, made the operating system for Palm devices; the sale freed Palm to work with other operating systems.

"Things have changed," said Colligan. "We aren't in the underlying OS business anymore, which has freed us to partner with others."

But Palm and Microsoft said yesterday the sale is only one reason why the device is coming out now. The two companies have been working together for much longer, even before Palm acquired Handspring, the original maker of the Treo.

The close relationship even led Sunnyvale, Calif.-based Palm to participate in the development of Microsoft's new Windows Mobile 5.0 operating system, which was released in May.

"We have lusted after some of the things they did well, and we've done some things well, too," Gates said. "It's wonderful to see that coming together."

The partnership was kept quiet until rumors emerged the past few months. Pictures of the new phone device surfaced only last week on Engadget, a tech Web site.

The two competitors kept things under wraps in part by using code names. Microsoft was Woodstock, Palm was Purple Haze, and the Treo was called Hendrix.

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"We were walking around for months saying Purple Haze," Scott Horn, Microsoft's general manager of the Mobile & Embedded Devices Group, said in an interview yesterday.

Of the development of Windows Mobile 5.0, Horn, said: "We got a lot of great feedback from the Palm team. ... We learned quite a bit."

Page Murray, Palm's vice president of marketing, said it was important for the Treo to keep the same look and feel as past versions, even though it was switching operating systems. (Other Treo models will still be offered with the Palm OS for up to five more years, when Palm's license with Access will be up for renewal.)

"We came in with a laundry list of requests; some they met right away," Murray said. "We've kept what we believe is the Treo experience."

The partnership is significant to both companies as they compete in the wireless-device business.

Palm's glory days have faded as Microsoft's mobile operating system, found mostly in Pocket PC handheld devices, has risen.

Meanwhile, both face steep competition from Research in Motion's BlackBerry device, which gained early acceptance among business users.

"It's a big win for all three players [Palm, Microsoft and Verizon Wireless], but Microsoft is the biggest winner in my mind," said Michael Gartenberg, a Jupiter Research analyst. "By Palm embracing the platform in such a big way, it's as much a psychological win for Microsoft as it is a business win."

Despite yesterday's announcement, not much is known about the device, including its price. Early reports said the device, referred to as Treo on Windows, would be called the Treo 700w, but that was not confirmed yesterday.

It will have an Intel processor and feature EV-DO technology, which will allow it to run on Verizon Wireless' high-speed 3G network.

The phone will not have built-in Wi-Fi, but it will have the traditional functions of personal digital assistants, along with access to Microsoft Outlook and applications such as Word and Excel.

Last week, Sprint launched the first Windows Mobile 5.0 Smartphone in the United States, the PPC-6700 Pocket PC Phone. It has EV-DO and Wi-Fi capabilities and is listed at $629, with $150 "instant savings" bringing it below $500.

The advantage of Windows Mobile 5.0 as the operating system is its ability to easily communicate with a Windows computer through the popular Microsoft Exchange server.

Unlike with the BlackBerry, a company doesn't have to purchase a new server for e-mail to go to devices.

Gates said he hopes that aspect will attract companies that don't want to spend money or time on an additional server. He said that of the 130 million Microsoft Exchange users today, only 50 million have some mobile e-mail. A third of those are RIM BlackBerry users.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com

Microsoft may add to India staff

A Microsoft executive told journalists in India over the weekend that the company is doubling its staff there, but officials in Redmond say the executive was apparently referring to previously disclosed plans to expand the company's Hyderabad development center.

The company is now adding a second building to the campus it bought in 2003.

The executive also told Reuters that Microsoft will double staff in Bangalore to 1,000.

Specifics for Bangalore weren't available yesterday, but the company is adding a research lab and partner facility, in addition to its product-support center there, said S. Somasegar, a vice president in Redmond overseeing Microsoft's India operations.

Seattle Times business staff

Copyright © 2005 The Seattle Times Company

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