Sony Picks Palm OS

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Event Summary

Associated Press, 11/16/99 LAS VEGAS - In a major snub to Microsoft Corp., Sony unmasked plans yesterday to build new hand-held gadgets that could allow people to view videos, listen to music and organize information - without the help of the Windows operating system.

The Japanese consumer electronics giant instead chose the Palm operating program to run the basic functions of the devices, advancing the 3Com Corp. unit's bid to spread its software into the far reaches of lightweight computing.

Sony Corp. is betting the popular Palm will help further its ambitions to expand its leadership in consumer electronics into computing. Importantly, 3Com agreed to adapt the Palm operating system to Sony's Memory Stick removable storage medium, which Sony is fighting to get widely accepted for storing and transferring data, sound and images among a variety of gadgets and computers.

Market Impact

This announcement gives the Palm OS even more legitimacy/cachet than it already has. It currently is the dominant player in the palmtop market, although Windows CE OS has made some inroads in recent years. Spurred by Microsoft's pushing, Windows CE has been trying to catch the Palm OS for some time, but the world does not seem to be willing to help. This event, coupled with the recent announcements by Everex to drop its Windows CE-based palmtop series, and Nokia to use Palm in its forthcoming "smart" telephones, negatively impacts Redmond's designs to capture the palm market. We expect that Microsoft will use Internet "appliances" as its fallback position for CE. We do not believe CE will disappear on palmtops, but Microsoft will need to adjust their strategy yet again if they want to own this market.

In general, this announcement will not lead to market consolidation, because the two main players will only see migration from one to the other. However, we believe it will lead to market growth as new types of devices become available from Sony. We expect to see new hardware from Sony within 18 months, maybe even in time for Christmas, 2000.

User Recommendations

This is a big plus for the Palm OS, as users now have an added reason for picking a Palm-based device. Sony's marketing and consumer electronics strength will help Palm move into areas beyond the palmtop. If potential customers had been worried about going against the Microsoft grain, this announcement should help ease their concerns.

Presently, the customer focus will be non-business consumers, but as palmtops make inroads into the corporate market (See TEC News Analysis article: "Palm Tries to Take the Desktop in Hand", October 27th, 1999), the focus will shift slightly.

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