Not Just for Notes Anymore: 3Com Sees Bigger Scope for PalmPilot

Not Just for Notes Anymore: 3Com Sees Bigger Scope for PalmPilot

By Richard McCaffery, Staff Writer

3Com Corp.'s plan to make its popular PalmPilot a critical business platform rather than just an electronic organizer hinges on the company's ability to sign developers and team with systems integrators, a company official and industry analysts said.

The first part of the plan is under way. The Santa Clara, Calif., company has formed partnerships with multiple developers in the past nine months to create programs to allow PalmPilot users to access applications running on the enterprise.

For example, Oracle Corp. of Redwood Shores, Calif., has developed Oracle Lite, which gives mobile workers access to Oracle databases from a PalmPilot. Oracle started selling the application three months ago. Other developer partners include SAP, Sybase Inc., Computer Associates International Inc. and Remedy Corp.

"I think we have the leading companies investing in our platform," said John Inkley, Palm Computing Inc.'s federal sales manager. The next step is teaming with systems integrators, which will be needed to help customers implement the technology.

This is a new step for Palm Computing Inc., which was bought by 3Com Corp. when it purchased U.S. Robotics Inc. in 1997. Palm has not had to work with systems integrators in the past because its devices did not require integration with computer systems. They simply were sold to customers and used as personal organizers.

Moving to the enterprise is a little more complicated and requires key partnerships, Inkley said. The company is in discussions with Computer Sciences Corp., Electronic Data Systems Corp., Lockheed Martin Corp., Unisys Corp., and others, said Inkley, whose goal is to sign up to four integrator partners in the next quarter, before the end of the government buying season.

"We don't have the resources to deploy a Palm device to every soldier in the field," he said. "That's where we see the strength of the integrator community."

Inkley said he is targeting all government agencies, but he is putting an emphasis on the Defense Department in organizations such as the Navy and Defense Logistics Agency.

"We want to go anywhere where someone is carrying a notebook PC to do data collection," he said.

3Com is a Fortune 500 company that sells networking gear, communications technology and network management software. The company had earnings of $30 million on sales of $5.4 billion last year.

Roughly 10 percent of 3Com's revenue comes from Palm Computing, analysts said, and less than 10 percent of Palm's business is with the federal government, according to Inkley, who wants to boost that number to 20 percent in two years. Palm has 400 employees.

Industry analysts like the company's strategy, but said the company will have to move fast ? its primary competitor is Microsoft Corp., which makes Windows CE, a hand-held computing device similar to the PalmPilot.

"Palm has got a window of opportunity," said Jeff Van Rhee, securities analyst at Olde Discount Corp. of Detroit. "They've got to get that [operating system] out there and licensed."

Van Rhee described Palm as the bright spot of 3Com, which stumbled in the quarter that ended Feb. 26. The company pre-announced weak earnings March 2 because of seasonal weakness and an unexpected slowdown in the U.S. and Latin American enterprise markets.

The company reported sales of $1.4 billion and earnings of $90 million, which beat last year's results, although the company still was integrating U.S. Robotics at that time.

Van Rhee, however, expects 3Com's troubles to continue, in part, because the market for analog modems, one of the products that U.S. Robotics makes, has gone soft.

Nevertheless, Van Rhee said Palm is in the right place at the right time with its enterprise device.

"I think it's just a general market trend to portability," he said. "As you add more features, I think you're really going to see the number of units [sold] rise."

Randy Giusto, director of mobile and display technology at International Data Corp. of Framingham, Mass., agreed.

Giusto expects PalmPilot sales to rocket at the enterprise level next year, when the year 2000 computer bug is in the history books, reliable applications have been developed, and corporations have tested the products.

"Palm has to work closely with application developers and seed corporate clients," he said. Once this happens, integrators will sign up naturally because their customers will be demanding the products, Giusto said.

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