Comments on: Handspring Posts Growth, Still in the Red

>> "It's hard to watch a company that started off with so much promise, spirit and innovation be reduced to just another cell phone sweatshop."

Why? They did this to themselves, for the most part.

They did start off with a great innovative spirit. But that innovation stagnated rather quickly. Look at the history of HS's product line and you see that only two innovative products were produced: Visor with its impressive SB slot...and the Treo. The time between those two product releases were filled with "me too" products like Prism, Platinum, Neo, Edge. Just more generic PalmOS devices. I don't consider that innovation, especially when they are a generation behind the market running a legacy POS (3.5). Handspring was a child of the dot com boom, and bust. It was built on the same baseless hype and over-inflated market value. I got caught up in this myself, I fully expected HS to become the great shining star of the mobile device market. Instead, I watched Sony run circles around them while the arrogant, and out of date, Jeff Hawkins continued to believe that his products didn't need higher resolution displays or color screens, or digital media functionality. I still remember watching a smug arrogant Hawking sitting on stage at PC Expo 2000 telling the crowd that "People are trying to sell me faster processors all the time, but I don't need them. 16Mhz is perfectly fine". Those words should be written on Handspring's tombstone.

SONY is heading to the place Handspring thought themselves destined. Leader of the handheld market.

I think the reason Handspring is failing is because they develop their own standards but fail to license or open them to others.

Look at the SpringBoard slot. This is exactly what The Palm platform needed when it was invented. Now that Palm is getting around to making a Universal Connector we can see this is true. But instead of using a *standard* I/O card type (i.e. CompactFlash) they had to invent their own and try to lock up the market. They *could* have worked with Palm to create a truly Universal connector for peripherals, but they didn't.

Compare Handspring to Sony. The *only* reason that Sony is beating Handspring is that they are the 800 pound gorillia and have other devices that use their custom MemoryStick. But I think this is really holding back Sony's potential to own the market. If the Sony's all used the UC and SD cards, I think we'd all buy them in a heartbeat!

I despise the !@# MemoryStick and the !@# SpringBoard and other vendor-specific no-one-else-can-use-them "enhancements". Imagine where would be if every brand of car required a different kind of gas!
I know it provides the potential to profit from accessories but vendors, please please stop doing this!

Palm Researcher at the University of Texas at Austin
http://www.edb.utexas.edu/petrosino/pda

Their time is up. They were hip when the competition was only Palm Inc. They have fresh color design, exciting springboard, than it all just not going anywhere starting from Prism than Edge.

Changing to phone business? gimme a break. They won't be able to out innovate company like Nokia and motorola. Do they have model with camera, ultra thin, mp3, with voice command ready for next season? They can't even put SD clot on Treo yet. And on top of that Microsoft is throwing money hoping to get part of the phone pie too.

85M in cash left? Is that even enough to pay for the hors d'oeuvres and glossy picture during a phone launch these days?

>> "and the Prism had the first 16-bit color screen"

For PalmOS devices yes, but WinCE/PPC devices had this years before Handspring introduced it. And as SONY correctly illustrated, 16-bit color is rather pointless on a 160x160 display. Higher resolution in conjunction with higher color depth offer the best display solution. Let's see, where is Handspring's high-res product? Oh, that's right...Jeff said we don't need more pixels. What a genius. :-

>I'd disagree about the Prism/Platinum as a me-too product. Those were both innovative devices at the time -- they introduced the Dragonball VZ chip and 33MHz speeds into the market, and the Prism had the first 16-bit color screen, and was the second color Palm OS device.

I normally don't disagree with you, Ben, but I think that calling these "innovative" is overstating their case a little. These are nice enhancements but hardly the kind of breath-taking actions I'd call innovative. I feel that innovation has to be more than incremental, and both of these were that. Now the Treo, that is pretty innovative in a lot of ways.

Handspring had a lot going for it when they launched, but so did a lot of other companies. Now that the market's soft, they're hurting. The PDA market seems to be moving towards commoditization (as the cell phone market has), with smaller margins. It'll be interesting to see if their current strategy plays out in the market, or if the market picks up enough so that it doesn't matter. I'm not terribly optimistic on either count, given what I've seen here...

"I knew there was something wrong in Hawkin's head when model after model rolled out with Palm OS 3.5, long after 4.0 was the standard."

And what would the advantages have been if Handspring would have used 4.0 instead of 3.5? Most of Palm's 4.0 incorporated the advancements Handspring introduced in version 3.5H1, 16 bit color.

So, what did Handspring do wrong besides probably avoiding aditional licensing fees for the "new" version of 4.0?
I can't really think of a whole lot a new 515 can do that my 2 year old Prism cannot. Heck if I wanted to my Prism could play MP3's, have an advanced sound card, blood gluclose monitor, sleep monitor, use CF cards, memory sticks, and smart media. Can your 4.0 software do that?

Look, I'm not happy with the current situation of Handspring but give Jeff and the team some credit...

--Dave

No question, it was the springboard slot & offerings that set the Visor apart. I wrote Handspring a strongly worded e-mail (not that they cared) when Donna came gave the springboards what was tantamount to a the death sentence a while back. They forgot what was making them. Handspring responded to my e-mail with a boilerplate restatement of the company line. A few days later, Handspring sent springboard developers a letter of consolation, trying to put the best spin on Donna's comments, reiterating it's commitment to the Visor line, but it was no more than a postmortem bit of rah-rah. The springboard was dead, and so was Handspring, which needed the Visor line to provide cash flow while it touted the Treo.

Communicators are a terrific concept, but the GSM platform is not widespread enough to pull this off. Handspring's implementation leaves much to be desire vis-à-vis GSM offerings in Europe, where GSM has long been the standard and everyone's happy with it.

Anyway, my prediction: Palm's gonna get bought out at a fire sale price in a year or so; Handspring's as good as history. Shame, shame, shame. In the meantime, I might buy one more Visor at the increasingly discounted prices before the company goes belly up.

I read the comments on PIC regarding Handspring and it amazes me that the company is still in business. For the past two years I have read posts predicting the end of the company and yet they are still here. Have they made some mistakes? Yes, but which company in this or any other industry has'nt? They still make innovative products, despite what is posted on PIC, and are not simply using OS 3.5 in their products. The Treo 90 uses OS 4.1 and HS has stated that OS 5.0 products are coming in 2003. They will be fine and the company is not going anywhere.

>> "For the past two years I have read posts predicting the end of the company and yet they are still here....They will be fine and the company is not going anywhere."

What do you mean? Handspring has been deteriorating for the past two years. They have degraded to the point where financial operations are winding down. They have lost the handheld market to competitors, fueled in part by their haphazard decision to exit the PDA business. And, in case you haven't been keeping up with current events, the TREO isn't taking off like the company had hoped. And they have very little hope of ever reaching profitability. Recently they made the decision to leave the retail channel. Even a blind man can see that Handspring is a company in permanent decline.

And you say they will be fine? I'm glad you aren't my portfolio manager. :-)

>>What do you mean? Handspring has been deteriorating for the past two years. They have degraded to the point where financial operations are winding down. <<

By that standard the vast majority of tech companies, including Palm, operating today will be out of business by Christmas.

>>They have lost the handheld market to competitors, fueled in part by their haphazard decision to exit the PDA business. And, in case you haven't been keeping up with current events, the TREO isn't taking off like the company had hoped. <<

If you have been keeping up with current events you would know that HS seems to be taking a slightly different approach to securing a segement of the handheld industry than their competitors. Also, I believe that the Treo 90 would be considered a pda and it is acutally selling better than had been expected.

>>And they have very little hope of ever reaching profitability. Recently they made the decision to leave the retail channel. Even a blind man can see that Handspring is a company in permanent decline.<<

This is pure speculation and has been said about so many tech companies that it is almost a cliche.

>>And you say they will be fine? I'm glad you aren't my portfolio manager. :-)<<

As am I, it is always difficult to deal with clients that think they know everything and do not have the ability to see beyond their own bias.

Ultimately no one knows how this will turn out. Over the past two years people have been writing Handspring off yet here they are still selling innovative products. Like it or not, they simply could not make it selling pda's alone. They made a move, right or wrong, and are developing a strategy that seems to be working for them.

Will they ever be more than a niche player in the cell phone world? Probably not. To be honest, my feeling is that the Treo 90 is Handspring's best short term opportunity to build their business. However, whatever the ulitmate outcome, the Treo family stands a very good chance of remaining part of the Palm OS family for many years.

they have been saying that treo will take the world by storm....any minute now...any minute..just you see. *big yawn*

>>Ha! I especially love how Treo fans believe their beloved product is an "underground success". Oh, it's the hottest product on the market, people just aren't buying them...that's all.<<

I am not a Treo fan and am not even much of a Handspring fan. To be honest I own a Visor that I use in the field because I really don't care if it gets lost or broken. However, I am really not fan of people that do almost nothing but post negative, uniformed comments for their own amusement. PIC was once a great forum for Palm enthusiasts and today it is nothing more than "mine is better than yours". Its a shame because at one time the unity of the Palm community was what set it apart from the WinCe crowd.

I listened to the call yesterday. There are some big short term negatives that need to be overcome if this company is to survive. But if they have the cash to hold out, there is promise.

The Negatives:

. Lease obligations: During their peak, HS projected that they would expand and need additional space at two, yet to be built buildings. The buildings are nearing completion, but there is nobody to place in them. HS will take some hit to pay to get out or sublet these buildings. Expect the hit to be just shy of $3 Million.

. Inventory: There is still $18 Million in inventory. Not all of this is bad. Some of the inventory is for accounting sake. This part of the inventory are Treo 300's that were made to order for Sprint who will take them. The balance of the inventory are their older units sold online or to retailers. This they will have a harder time gettting rid of. Expect another hit here to cash on hand.

. Q4 Orders: Spring asked Handspring to move some Q2 orders to Q1 to support the 3G launch. These orders are expected to be larger than the replenishment orders. Expect an EPS hit here, but remember Handspring warned on it yesterday during the call.

Positives:

. Handspring reported that they were close to 2 new carrier relationships. If successful, that will help them to sell more Treos. They sold 44,000 in their 1st quarter - more than the previous 2 combined and Sprint was only selling them for 1 month.

. Corporate sales: Through Sprint and other partners, they have 2,500 corporate prospects in their pipeline. Adding to the positive speculation, Sprint's own salesforce us using the Treo 300 rather than another handset.

. Statistics from Sprint: The profile of the typical Treo 300 user shows that Handspring may be an attractive vendor to carriers. The average Treo user purchased a medium to higher cost phone plan. In addition, that average user purchased a data plan at 20x the rate of any other handset owner. Finally, the churn on these customers is significantly less. Bottom line is HS is helping to attract and keep the best customers for the carrier.

. New products: Handspring was quiet on new products, but indicated that there were 2 in development. I doubt that they will be releaed in the current quarter, otherwise they might not have warned, but there will be new products to boost sales and aid in profitability.

Bottom Line:

Handspring is in better position today because of their change in strategy. Their inventory will be sold, written off and eliminated. Their new products will be built to order so they won't have unused products wasting away at a warehouse. They will not spend as much to sell these products, because they are working with fewer customers. Their volumes will increase as they add carriers. However, they do have a set of challenges before they begin to turn a profit.

>>The market is no longer populated by Palm brand devices, other devices are becoming increasingly popular...including Pocket PCs. Many of us here have experience using a multitude of these devices, and therefore aren't basking in the same blissful ignorance that other "one product" enthusiasts dwell.<<

You seem to miss the point here. First, the market is populated by Palm brand devices as well as those using the PPC and Linux platforms. Second, the name PalmInfoCenter would seem to indicate a site dedicated to Palm devices. It seems fairly obvious that a number of people have experience using other platforms which really has nothing at all to do with "basking in blissful ignorance". My guess, given the price, is that Treo users are not simply "enthusiasts" but are people who value the technology and use it for practical reasons. That being said, I still fail to understand the underlying negativity of your posts. You seem to think that Handspring is about to fail and I will respect that opinion. It is unfortunate that the same cannot be said of you and your caustic attacks on people that seem to sincerely want Handspring to succeed.

"Second, the name PalmInfoCenter would seem to indicate a site dedicated to Palm devices."

>>No, this is a site dedicated to PalmOS devices. Not the Palm brand.<<

Thank you for confirming exactly what I said. Palm devices means just that, devices running on the Palm OS just as PPC devices refers to devices running the PPC OS etc.

>>The point is, people who frequent this site are not as "like minded" as once was the case. There are Palm users, Clie users, Kyocera users, Samsung users, Handera users, and people that use a combination of PalmOS and PPC or Linux devices. So it only natural that this site is no longer a Palm glee club.<<

This is an interesting observation although I'm not sure what point your attempting to make. It is irrelevant whether or not the people who visit this site are "like minded". I have owned, or used at work, Palm, PPC and Linux devices and have found that each of them has positive attributes. Further, I can't think of a company that manufactures handheld devices that is deserving of the negativity that Handspring receives on this site. They all add something positive to the industry and none seems likely to leave the market any time soon.

While I have enjoyed your banter today a great deal, the simply fact remains that negativity on PIC serves no useful purpose. As has been mentioned in several posts, your opinion is respected. You clearly have a general knowledge of technology and at least a rudimentary understanding of business, however, your negative approach is difficult to understand.

No one has asserted that everything must be "happy", on the contrary the situation at Handspring is anything but happy. To be honest, I'm not much of a Handspring person but am sick of reading about the demise of HS when no one has any idea what the future holds for the company. They are producing innovative products in a segment that is still in its infancy and could easily find a niche where they can compete. Constructive criticism is one thing but the infantile bashing that goes on in some of these forums gets old really quick.

>>and no, there is nothing inovative about treo<<

While I disagree, this is an interesting observation and one that I have not heard before. As far as the Samsung and Kyocera are concerned, it really is a difference in philosophy as they don't seem targeted at the same market. The Treo is a good pda that can be used as as phone while the Samsung and Kyocera are great phones with pda functions. I say that the Treo is a good pda because, in my opinion, it lacks the functionality of the great palm pda's currently available. I like the thumb board and have found that many people take to it quicker than graffiti. However, with no expansion it lacks the one attribute that could make it a hit with enterprise customers. On the other hand, the Kyocera and Samsung models do not have a large enough screen for many enterprise uses. I would guess that all three will find niches within both the consumer and enterprise market. The Treo will appeal to customers looking more for a pda with phone capabilities being a secondary need. The reverse is likely to be true for customers that prefer the Samsung or Kyocera models.