Even though handheld-maker Handspring was struggling financially, industry analysts could understand why Palm wanted to buy it: the Treo 600.
The sleek new combination cell phone, personal digital assistant and e-mail device, which is expected to hit store shelves in October, turned heads at a Sprint PCS developers conference in Dallas earlier this month. According to analysts, the Treo 600 is the smallest handheld to include digital camera, cell phone, PDA and BlackBerry-like e-mail capabilities.
"The Palm people had to notice the favorable reaction the audience was giving to the new device," said Gartner analyst Todd Kort. "It probably helped clinch the deal." Palm announced its planned acquisition of Handspring earlier this month.
While Kyocera Wireless, Palm and Handspring already sell handheld devices with the features of the Treo 600, Handspring was able to insert a QWERTY keyboard and keep the device small compared to the more square Palm handhelds and Kyocera's bulky phones.
At 4.41 inches by 2.26 inches by 0.87 inches, the Treo 600 tips the scale at between 5.9 ounces and 6.2 ounces – depending on the type of cellular network it runs on – and resembles a phone more so than previous PDA-like Treo devices did.
"This really looks like an industrial design several generations ahead of the current Treo," said Forrester Research analyst Rob Enderle. "It does the phone stuff very well and the RIM (BlackBerry) functionality without sacrificing the functionality of the phone."
However, there are some minor setbacks to the device. The Treo's small keyboard, while sexy, could make typing difficult for those with repetitive stress injuries or long fingernails. The buttons are placed more closely together than in the BlackBerry e-mail device and the current Treo product line, Handspring director of handheld products Greg Shirai said.
"We tried to make it look more like a mobile phone than a PDA," Shirai said.
Also, the phone's color screen is only 160-by-160 resolution, which may be disappointing for the most avid PDA users, who probably are used to a 320-by-320 screen. However, the difference may not be noticeable at all to most PDA owners, Kort said.
Overall, Kort said he expected people who are used to owning a combination cell phone and PDA to be happy with the Treo 600, which gives users between 4.5 hours and 6 hours of talk time – again, depending on the phone network – Internet access, e-mail and short-text messaging service. The device, which boasts 32 MB of memory, also has a Secure Digital expansion slot for added memory, an MP3 player, pictures and video games.
Handspring expects the device to sell for between $400 and $500, depending on how much the cell-phone companies decide to subsidize it. Kort said the price is competitive with that of combination PDA-cell phones on the market today.
Handspring has shipped 330,000 Treo communicators to date, but Kort estimates that at least 100,000 units – if not more – are still sitting on the shelves of the company's retail partners. "That's why it was really imperative for (Handspring founders) Donna Dubinsky and Jeff Hawkins to sell the company this quarter before they reported earnings," he said.
Handspring may be further hurting its current Treo sales by prematurely unveiling the Treo 600, which is not due until this fall. But Dubinsky and Hawkins may have recently "let the cat out of the bag" in Dallas to seal the deal with Palm, Kort and other analysts speculated.
"I am very excited about it … watching the Palm guys go on about how incredible (the Treo 600) is," Enderle said.
As of Tuesday afternoon, Handspring stock (HAND) was down 3 cents, to 96 cents a share. Palm stock (PALM) was down 19 cents, to $16.06 per share.
