Pocket PC gains set stage for enterprise battle

New research sees Microsoft Corp. clawing back market share from Palm Inc. in the handheld computer market, and analysts say the biggest battle could be about to begin in the corporate playing field.

Figures to be published next month by International Data Corp. show Microsoft’s Pocket PC platform accounting for about 18 per cent of PDAs shipped worldwide in 2000, up from 13 per cent last year. While the gains appear small, they come in spite of the release of Handspring Inc.’s popular Visor computer, which uses the Palm platform and snapped up almost a third of the U.S. retail market upon its release.

Much of the Pocket PC gains were likely made since April when Microsoft released its new Pocket PC Platform, analysts said. The new design, used in Hewlett-Packard Co.’s Jornada and Compaq Computer Corp.’s fast-selling iPaq device, fixes many of the criticisms leveled at early Windows CE-based devices, which were slammed for being too slow and feature-laden compared with Palm’s simple, more elegant products.

In particular, analysts have pointed to the Pocket PC’s improved battery life, bright color display, and support for considerably more local storage than Palm-based devices. The Microsoft platform also offers a range of familiar applications that synch easily with existing desktop programs, including Pocket versions of Word, Excel and Outlook.

The iPaq’s US$499 price tag makes it a steeper buy than Palms, which start as low as $149 for the m100, a fact that may help Palm continue to dominate the consumer and education markets. But the Pocket PC’s improved design, along with synergies with Microsoft’s PC and server software, could make it a compelling choice for some corporate buyers going forward, said Kevin Burden, a senior analyst with IDC.

“If you look at the enterprise and how they are adopting these devices … the bigger the company, the more Pocket PCs we’re beginning to see, the smaller the company the more Palms we see,” Burden said.

MortgageRamp, a commercial real estate financing company in Horsham, Pennsylvania, wants to arm its site inspectors with handheld computers so they can deliver inspection results directly from the field using wireless connections. The company has begun to deploy hundreds of the devices, which should allow it to approve loans for customers more quickly.

“We started out looking at Palm pretty heavily, just because personally we all use them,” said Ken Beyer, chief technology officer at MortgageRamp. “But there’s a real strong argument there (to change). We have a Microsoft platform here and they’ve made it real easy to put it on a Pocket PC.”

The company uses Microsoft’s SQL Server database, and likes the synergy with the Pocket PC version of SQL Server, which is currently in beta. In addition, the larger memory support from Pocket PC – 32M bytes on a typical device, compared to 8M bytes in a Palm – makes storing a corporate database on the device a more realistic proposition, Beyer said. (Compaq is an investor in MortgageRamp.)

Some analysts also cited the familiarity and breadth of Microsoft’s development tools as an advantage for Pocket PC. Far more third-party developers offer applications for Palm devices, but corporate buyers may be swayed by the Pocket PC’s familiar, 32-bit Windows operating environment, said Gerry Purdy, president of research company Mobile Insights Inc.

Palm’s proponents, on the other hand, point to its strong installed base of users in the workplace – a momentum that can be carried into corporate deployments, argued Michael Mace, Palm’s chief competitive officer. In addition, handhelds based on the Palm OS from Symbol Technology already have become a mainstay in key vertical markets, where, for example, they are used by warehouse workers to track product inventory.

Palm already offers server software to manage and keep track of multiple devices deployed to workers. At its PalmSource developer conference that begins this week in Santa Clara, Calif., hundreds of Palm partners will announce products that make it even easier to deploy and manage Palm-based hand helds in the enterprise, Mace said.

Palm will also announce a deepening of its relationship with Sun Microsystems Inc. over its Java programming language, Mace said, although he declined to elaborate. Microsoft is in a legal battle with Sun and has shied away from supporting Java, which is popular among some corporate developers, and which Microsoft views as a threat to Windows. IDC’s Burden said Microsoft’s sometimes antagonistic relationship with Sun, Oracle Corp. and some computer makers won’t help the company push Pocket PC into the enterprise.

“You can’t discount the resentment out there in the industry towards Microsoft,” Burden said.

What corporate customers really care about, according to Mace, are development tools and the availability of skilled programmers. Palm has a better story than Microsoft on both counts, he contends. In addition, he notes, Palm partners offer applications that allow users to view files created with Microsoft programs like Excel and Outlook – they just aren’t allowed to market them using those familiar brand names. And early next year, he said, Palm will add support for SD (Secure Digital) cards in its devices that increase available memory to 64M bytes.

“We’re still seeing a very rapid uptake of Palm throughout enterprise accounts,” Mace contended, citing examples ranging from the U.S. Navy to Nielson Media Ratings. “I’m sure you can find cases of people looking at Pocket PC, but in terms of actual sales we’re seeing tremendous ongoing interest in Palm … and I don’t see any particular trend by organization size.”

Nor are Palm’s fortunes tied to its own brand of devices, analysts note. As well as Handspring and Symbol, the company licenses its Palm software to Sony Corp., IBM Corp., Kyocera, Nokia Corp. and TRG Products, each of which makes royalty payments to Palm for devices sold.

“We hear a lot about the iPaq being in backlog, but the Jornada and all the Casio products are not in backlog,” Mace said. “That doesn’t show a lot of momentum for the Pocket PC. What it shows is that there’s one hot product out there.”