Handspring's tumbling act

[Steve]

During a recent conference call with Wall Street analysts to discuss its quarterly earnings, CEO Donna Dubinsky more than hinted at the company's planned metamorphosis...

Read the full story at http://www.brighthand.com/palmpowere...es/tumble.html

[tthiel]

I can't believe they've anounced this when they've got a glut of Visors sitting in stores and warehouses already. No wonder they haven't bothered to bring decent updates to the existing Visor lineup. Their Springboard partners must be really furious. They might as well go out of business now. Also I think the phone companies will eat them alive.

[Mike Cane]

Published on CNET/news.com on November 13, 2001!

While Handspring is clearly focused on wireless, Hawkins offered no timetable for when the company might exit the traditional handheld business.

"The PDA as we know it will become the middle and low end of the market," he said. However, he added that the company might still be selling handhelds 15 years from now. "Hewlett-Packard still sells calculators," he noted.

http://news.cnet.com/news/0-1006-200-7865649.html

[wshwe]

I believe that HP is fazing out its scientific calculator business.

Springboard developers should find something else to do ASAP.

It's too bad that HandSpring can't get a monthly or annual commission from the wireless carriers. HandSpring's soul searching bodes ill for Palm. Sony and Microsoft can afford to sustain hefty loses. Palm and HandSpring can not. Sony and MS can ride out the market untill truly powerful multimedia PDAs become reality.

[imported_argent]

OK, we know about the Osborne Mistake (don't pre-announce new products if they're going to hurt sales of existing products). We know Palm did it with the m505. The Osborne Mistake is easy to make... you just have to be sloppy about press releases.

But this is going beyond that... this is deliberately killing existing products in favor of a completely different... and one that you have no evidence is going to sell.

This is the second time I've seen this in the last six months. Is this a common thing for companies to pull? I don't recall seeing quite as obvious a blunder before Compaq declared they'd abandon Alpha in favor of Itanic (a processor that may never reach parity even with the current generation of Alphas, that Compaq's main competitor has already dropped, and that has non-subsidised sales of 500 units... total).

I dub this the Compaq Mistake. I hope that Hawkins has a backup plan.

[Steve]

There's a Catch-22 to this whole thing, Peter. Donna was on a conference call with Wall Street analysts regarding the quarterly earnings announcement. All these guys want to know about is the future and all they want to hear from Donna is the word "wireless." If Donna says "wireless" then it buoys the stock price. If Donna doesn't say "wireless" then the stock will tumble, as it did when Wall Street found out that the Treo and Palm's i705 would not be released in 2001. A stock trade strictly on what Wall Street thinks of the future of that company, not necessarily the present.

So, Donna's stuck in this Catch-22. Should she appease the street with her discourse on Handspring's wireless future or simply say that the Treo is late and watch the stock price get bashed?

Unfortunately now, as you've mentioned, it will likely cannabalize Visor sales and will chase away Springboard developers.

But what other option did Donna really have? It seems she was in a lose-lose situation?

[imported_argent]

Steve, I honestly don't get the point you're trying to make. How does "talking about Handspring's wireless future" require that they kill all their existing product lines?

And don't fool yourself, this will kill them if they don't come up with some truly compelling spin soon. And the only edge Handspring has is the Springboard slot. That is, after all, why the Edge cratered... it didn't have good enough support for the Springboard slot. There are still only two PalmOS machines with real expansion capability: the Visor and the Handera 330, and the Handera is hardly a competitor that Handspring needs to worry about. They have the whole market to themselves... and a significant market share as a result.

The Treo is coming late into a crowded market with no significant advantages over the units already out there. I can call Sprint right now and order a Kyocera or Samsung phone today, and get a compact PDA/phone not much larger than my Nokia with buttons *and* a graffiti area, or a color unit with a soft graffiti area. It might not look as cool for the venture capitalists, but the Visor is a bird in the hand.

And now, it seems, a dead one.

[Stephen Borchert]

I found Mr. Hawkins' clarification a bit of a comfort. I've purchased TWO Visors in the past month and the Visor Phone. I agree there's not much innovation there -- it's basically an optimized Palm Organizer (for Handspring, not for the user).

If the economy hadn't tanked, we'd be reading articles about the death of Microsoft Pocket PC (again) and the unstoppable freight train that was Palm, Inc.

It's a buyer's market for handhelds right now.

[Steve]

Yes, I wasn't too clear, was I Peter?

For one thing, 99% of the people (including myself) that have reported Donna's comments did not participate in the conference call. We got the information second-hand and out of context. The single line that most of us are quoting is totally out of context.

That's not to say that Handspring isn't really going to sink a lot of money into the future of the Visor (it appears they're not). But it's not going to happen today. Many of us have felt for the past year that Handspring would untimately have to dump the Springboard concept, not on technical grounds (it's got a lot going for it there) but based on business factors. It's costly to design, develop and manufacture Springboards, relative to other types of media. And the market for them is small. Low demand equals high prices, which in turn keeps the demand down. It's a sad cycle.

The other piece to this is that it appears that Handspring plays its cards very close to the chest and its developers really don't know what is going on. General statements, like the email from Jeff Hawkins, will not solve that.

Peter, serious question. What would you do at this point if you were a Handspring developer?

[imported_argent]

Originally posted by Steve B
Many of us have felt for the past year that Handspring would untimately have to dump the Springboard concept, not on technical grounds (it's got a lot going for it there) but based on business factors. It's costly to design, develop and manufacture Springboards, relative to other types of media. And the market for them is small.

How small? There are more Visors out there than there are Pocket PCs, and Pocket PCs are about the only significant market for compact flash cards other than memory cards. And it's actually cheaper to develop Springboard modules than Compact Flash (let alone memory stick or secure digital) since the interface is simpler and you can build them to much lower tolerences because the plastics are bigger. Yes, you have to have custom plastics, but that's the case for ANY non-memory expansion module for any card.

And on top of that you don't need to create an installer and drivers for half a dozen dlightly different pocket PCs and hsndheld PCs, and a Windows installer, and a Macintosh installer... you just put the drivers on the module (in a cheap flash memory or ROM chip, that you'd need anyway for your firmware) and they just work... so your support costs are lower and you don't have to decide whether or not to support Macs or Windows NT.

Peter, serious question. What would you do at this point if you were a Handspring developer?

A springboard module developer? I have not the faintest idea. There's been a massive number of Springboard modules released, in more variety than all other small-unit expansion... because it's so easy, and because there are so many people out there with Visors. I guess I'd continue production as long as it made money, but I doubt there's enough market for any other expansion product to justify doing a version for SD or CF or SMS.

Here's a serious question in response: what alternative to Springboards do YOU see that's cheaper to develop and has a larger market? I only see one vaguely credible contender

PCMCIA/PC-Card.

There's all those laptops out there, but I really don't see it as an alternative.