Apple to take bite at Palm?

Speculation rife as investors call for sale of handheld vendors

Clive Akass, Personal Computer World 06 Feb 2006

Speculation that Apple plans to buy handheld maker Palm has been revived by a call from two leading Palm investors for the company to be put up for sale, according to the local paper of both companies.

Mike Nelson, who owns eight per cent of Palm shares, argued that the company is poorly equipped to dominate the market for smartphones which are beginning to eat into sales of traditional PDAs, reports Siliconvalley.com , online edition of the San Jose Mercury.

The drift from PDAs to smartphones is borne out today by a report from analysts IDG.

Palm has sold one million phone-enabled Treos and its stock has nearly doubled in value over the past year.

But Nelson is reported to have told the Palm board that competitors are developing products quickly and could afford to sacrifice profits to gain market penetration.

Another shareholder, with five per cent of Palm shares, also urged a sale of the company late last year.

The fact that Apple has been named as a possible buyer may seem strange to those who recall that one of the most controversial acts of CEO Steve Jobs was to kill off the pen-driven Apple Newton, a pre-cursor of the Palm Pilot, when he returned to the company after a 10-year absence in 1996.

Yet the two companies are closely linked. They are near neighbours and several early Palm employees, including co-founder and former company president Donna Dubinsky, previously worked with Apple.

Palm, at least in its early days, also enjoyed the kind of anything-but-Microsoft fan base that has long sustained Apple.

Jobs tried to buy the company in the late nineties, according to the Mercury.
Neither Apple nor Palm has given any sign that there is any basis for the renewed speculation but there are obvious fits between the two companies.

Apple's Ipod boom can hardly be sustained unless it can head off competition from PDAs and smartphones that can pack music players along with a host a other functions.

Palm itself was slow off the mark in adding tricky telephony technology to its products and Apple would have a hard time starting from scratch in the market.

Also, for all their vaunted style, the latest Apple notebooks look like antiques beside the latest pen-driven Tablet PCs.

The company will sooner or later be forced to offer a pen interface, and could benefit from Palm expertise in the area - especially as tablets are getting smaller, and may eventually supersede the PDA.

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