PalmSource - rough times ahead?

Colin Dunstan · 11-01-2004, 02:40 PM

Earlier today PalmSource (PSRC) was downgraded by Needham & Co from Buy to Hold, because of the company's decision to port its Treo handheld computer product line to Microsoft's Pocket PC operating system. Needham said it thinks the current valuation of PalmSource reflects the potential upside of license fee revenue from rising Treo sales that could be lost to Treos running on Microsoft's platform. The broker left its financial estimates for the company unchanged for now, because the timing of the product's introduction is still uncertain.

As a result, PalmSource shares slumped more than 9 percent today.

The fact that the Treo is supposed to be ported to Pocket PC makes all my alarm bells ring. Did you hear about that before? I try to read all the news, but somehow it must have slipped me that PalmSource (or is it palmOne?) wants to step into the realm of Pocket PC. What do you make of it?

gadgetguru · 11-01-2004, 03:00 PM

It's sounds like a April Fool articles, only that it isn't April. As you stated, Treo isn't made by Palmsource, so they can't port it over to Pocket PC. Palmsource can't port the Cobalt smartphone OS over to PPC, since unlike Nokia System 60, it isn't a GUI but a complete OS. If PalmOne will port it to Pocket PC, then that would be stupid, given that there's lots of competition in that space and the Treo is leading the US market place. If it is lagging the PPC smartphone, then it makes business sense for PalmOne to port Treo to PPC.

For me, it probnably like a non-techy reporter writing an article, he knows nothing about. Maybe the Needham analyst read about PalmOne licensing Activesync for Outlook from Microsoft for the Treo. He then deduce that Palmsource (he mixed up the two companies), will be using Activesync for the Treo, hence...Pocket PC Operating System.

No other news available anywhere except the mention of downgrade from Needham. That analyst ought to be fired...a lot of people will lose money over such I believe is a bogus and faulty assessment. Palmsource is not in good shape but not because it is porting something that isn't theirs to Pocket PC.

Bob Russell · 11-01-2004, 03:20 PM

I agree that the story sounds like either the author is a bit confused or the analyst. The one I saw was from marketwatch.com via another news site.

Clearly it's a smokescreen, and the real reason for the downgrade is that they are readers of mobileread.com and have learned that I'm becoming happy with my PPC.

Alexander Turcic · 11-01-2004, 03:27 PM

That is really strange, I agree. Seems like the analyst is mixing something up here. The scary part, as usual, is the stock market community - after all, PalmSource stock went down badly today.

On the other hand, not based on this downgrade but in general I would hesitate investing in PalmSource today. Where are the major licensee it badly needs to survive?

Alexander Turcic · 11-01-2004, 04:58 PM

According to AP,

Needham & Co. analyst Charles Wolf said palmOne last month indicated that it may port the popular Treo smartphone -- currently run exclusively using PalmSource's Palm OS -- to Microsoft's Pocket PC software.

Although palmOne would continue selling Palm OS-powered Treos, the decision to support other systems serves as "a psychological blow because it could eliminate much of the upside in PalmSource's future financial performance," Wolf wrote in a research note.

"The loss of a portion of Treo sales would not be that critical to PalmSource's success if the company had diversified its license fee revenue stream over the past two years," he wrote. "But it has not. Collectively, the sales of PalmSource's other licensees represents a small fraction of the company's total license fee revenues."

---

Perhaps by "porting" the Treo he meant the introduction of a new palmOne device running with PPC.

gadgetguru · 11-02-2004, 01:48 AM

The news indicated that PalmOne 'last month' suggested. That Last month refers probably to the Activesync deal... which doesn't really indicate PalmOne is making a PPC device, just making it possible to link directly to Outlook without the need for third-party software. Those analyst needs to study the sector they are covering more closely or hire someone who do...maybe post a 'hiring' ads here...

Laurens · 11-02-2004, 02:23 AM

PalmSource takes hit on investment report (CNET News)

Quote:

Shares of PalmSource, the handheld operating system developer, dipped Monday on an investment bank's report that said key licensee PalmOne will use Microsoft's OS in its Treo line of devices.

Actually, I mentioned in an earlier thread that PalmOne was open to using OSes other than PalmOS, but I never thought they would actually do it.

Quote:

The report added, "We know that an announcement is virtually certain," citing comments made by executives following an event for PalmOne analysts on Oct. 5. However, the report said the analysts, Charles Wolf and Justin Udelhofen, did not know when a Microsoft version of the Treo would be released.

Is the writing on the wall for PalmOS?

Quote:

Udelhofen added that making Microsoft's OS available on PalmOne's Treo devices would render the devices more appealing to large businesses that use other Microsoft OS products. The analyst said he didn't expect PalmOne to ditch the Palm OS and that Microsoft OS support would complement the Palm OS.

PPC is far more appealling to businesses because of the much better database connectivity. Yes, improvements in this area are coming in Cobalt, but it may very well arrive too late and even then it has to play catch up.

Laurens · 11-02-2004, 12:54 PM

http://news.com.com/PalmSource+takes...j=news.1045.20

That investment bank's report may very well be off the mark.

Quote:

PalmOne representatives disputed the contents of the research note, from Needham & Co. The note said that PalmOne "tacitly admitted" it was working to make Microsoft's operating system available on the popular Treo line of phones.
...

PalmOne representatives said the report was based on a misunderstanding, adding that the company is platform-agnostic. The representatives also said the company as a policy does not comment on products that may or may not be under development.

gadgetguru · 11-02-2004, 01:19 PM

Quote:

Originally Posted by Laurens

http://news.com.com/PalmSource+takes...j=news.1045.20

That investment bank's report may very well be off the mark.

Sigh of relief, from a devoted Palm OS fan who still refuses to move to Windows Mobile despite the fiasco that is the T5.

PalmOne could be trying to extract more favorable terms from Palmsource and using the 'Windows Mobile' as leverage...lots of companies/government do it - Dell uses AMD as a gambit against Intel. Many government get huge discounts from Bill Gates after threatening to switch to Linux and/or Open/Staroffice

Laurens · 11-02-2004, 01:58 PM

Well, I'm still worried about the future of PalmOS. Even if this story is mostly a false alarm, the news of late has not been favourable for PalmOS. (I'm writing a business plan at the moment, so I'm very much "into" the subject matter right now.)

The fact remains that WinCE is more appealling to businesses because of the better database connectivity. I believe that any real growth in PDA sales will come exactly from the business market. The consumer market I consider to be a lost cause for PDA's - SmartPhones will dominate here. PalmOne's product strategy seems to point in this direction as well, with the Treo 650 obviously getting more attention from the R&D team and the T5 being such a half-baked effort. I bet we'll see a range of cheaper, cut-down Treo's next year, targeted at the consumer market.

Bob Russell · 11-02-2004, 03:00 PM

<<OFF TOPIC>> Does this mean there's hope for dual versions of Sunrise? !!!(Both Pocket PC and PalmOS). There's only a handful of things that still bother me about leaving PalmOS for PPC, and missing out on the future of Sunrise is one of them!

Quote:

Originally Posted by Laurens

Well, I'm still worried about the future of PalmOS. Even if this story is mostly a false alarm, the news of late has not been favourable for PalmOS. (I'm writing a business plan at the moment, so I'm very much "into" the subject matter right now.)

The fact remains that WinCE is more appealling to businesses because of the better database connectivity. I believe that any real growth in PDA sales will come exactly from the business market. The consumer market I consider to be a lost cause for PDA's - SmartPhones will dominate here. PalmOne's product strategy seems to point in this direction as well, with the Treo 650 obviously getting more attention from the R&D team and the T5 being such a half-baked effort. I bet we'll see a range of cheaper, cut-down Treo's next year, targeted at the consumer market.

Laurens · 11-03-2004, 03:07 AM

Yes, there's going to be a PocketPC version of my viewer.

11-01-2004, 02:40 PM	#1
Colin Dunstan Is papyrophobic! Posts: 1,926 Karma: 1009999 Join Date: Aug 2003 Location: USA Device: Dell Axim	PalmSource - rough times ahead? Earlier today PalmSource (PSRC) was downgraded by Needham & Co from Buy to Hold, because of the company's decision to port its Treo handheld computer product line to Microsoft's Pocket PC operating system. Needham said it thinks the current valuation of PalmSource reflects the potential upside of license fee revenue from rising Treo sales that could be lost to Treos running on Microsoft's platform. The broker left its financial estimates for the company unchanged for now, because the timing of the product's introduction is still uncertain. As a result, PalmSource shares slumped more than 9 percent today. The fact that the Treo is supposed to be ported to Pocket PC makes all my alarm bells ring. Did you hear about that before? I try to read all the news, but somehow it must have slipped me that PalmSource (or is it palmOne?) wants to step into the realm of Pocket PC. What do you make of it?

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11-01-2004, 03:00 PM	#2
gadgetguru Addict Posts: 214 Karma: 6370 Join Date: May 2003 Location: Asia Device: Tungsten T5	It's sounds like a April Fool articles, only that it isn't April. As you stated, Treo isn't made by Palmsource, so they can't port it over to Pocket PC. Palmsource can't port the Cobalt smartphone OS over to PPC, since unlike Nokia System 60, it isn't a GUI but a complete OS. If PalmOne will port it to Pocket PC, then that would be stupid, given that there's lots of competition in that space and the Treo is leading the US market place. If it is lagging the PPC smartphone, then it makes business sense for PalmOne to port Treo to PPC. For me, it probnably like a non-techy reporter writing an article, he knows nothing about. Maybe the Needham analyst read about PalmOne licensing Activesync for Outlook from Microsoft for the Treo. He then deduce that Palmsource (he mixed up the two companies), will be using Activesync for the Treo, hence...Pocket PC Operating System. No other news available anywhere except the mention of downgrade from Needham. That analyst ought to be fired...a lot of people will lose money over such I believe is a bogus and faulty assessment. Palmsource is not in good shape but not because it is porting something that isn't theirs to Pocket PC.

11-01-2004, 03:20 PM	#3
Bob Russell Recovering Gadget Addict Posts: 5,381 Karma: 676161 Join Date: May 2004 Location: Pittsburgh, PA Device: iPad	I agree that the story sounds like either the author is a bit confused or the analyst. The one I saw was from marketwatch.com via another news site. Clearly it's a smokescreen, and the real reason for the downgrade is that they are readers of mobileread.com and have learned that I'm becoming happy with my PPC.

11-01-2004, 03:27 PM	#4
Alexander Turcic Fully Converged Posts: 18,163 Karma: 14021202 Join Date: Oct 2002 Location: Switzerland Device: Too many to count here.	That is really strange, I agree. Seems like the analyst is mixing something up here. The scary part, as usual, is the stock market community - after all, PalmSource stock went down badly today. On the other hand, not based on this downgrade but in general I would hesitate investing in PalmSource today. Where are the major licensee it badly needs to survive?

11-01-2004, 04:58 PM	#5
Alexander Turcic Fully Converged Posts: 18,163 Karma: 14021202 Join Date: Oct 2002 Location: Switzerland Device: Too many to count here.	According to AP, Needham & Co. analyst Charles Wolf said palmOne last month indicated that it may port the popular Treo smartphone -- currently run exclusively using PalmSource's Palm OS -- to Microsoft's Pocket PC software. Although palmOne would continue selling Palm OS-powered Treos, the decision to support other systems serves as "a psychological blow because it could eliminate much of the upside in PalmSource's future financial performance," Wolf wrote in a research note. "The loss of a portion of Treo sales would not be that critical to PalmSource's success if the company had diversified its license fee revenue stream over the past two years," he wrote. "But it has not. Collectively, the sales of PalmSource's other licensees represents a small fraction of the company's total license fee revenues." --- Perhaps by "porting" the Treo he meant the introduction of a new palmOne device running with PPC.

11-02-2004, 01:48 AM	#6
gadgetguru Addict Posts: 214 Karma: 6370 Join Date: May 2003 Location: Asia Device: Tungsten T5	The news indicated that PalmOne 'last month' suggested. That Last month refers probably to the Activesync deal... which doesn't really indicate PalmOne is making a PPC device, just making it possible to link directly to Outlook without the need for third-party software. Those analyst needs to study the sector they are covering more closely or hire someone who do...maybe post a 'hiring' ads here...

11-02-2004, 01:58 PM	#10
Laurens Jah Blessed Posts: 1,295 Karma: 1373 Join Date: Apr 2003 Location: The Netherlands Device: iPod Touch	Well, I'm still worried about the future of PalmOS. Even if this story is mostly a false alarm, the news of late has not been favourable for PalmOS. (I'm writing a business plan at the moment, so I'm very much "into" the subject matter right now.) The fact remains that WinCE is more appealling to businesses because of the better database connectivity. I believe that any real growth in PDA sales will come exactly from the business market. The consumer market I consider to be a lost cause for PDA's - SmartPhones will dominate here. PalmOne's product strategy seems to point in this direction as well, with the Treo 650 obviously getting more attention from the R&D team and the T5 being such a half-baked effort. I bet we'll see a range of cheaper, cut-down Treo's next year, targeted at the consumer market.

11-03-2004, 03:07 AM	#12
Laurens Jah Blessed Posts: 1,295 Karma: 1373 Join Date: Apr 2003 Location: The Netherlands Device: iPod Touch	Yes, there's going to be a PocketPC version of my viewer.

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