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Palm may not find differentiating itself that difficult, though. According to Page Murray, vice president of marketing at Palm, the Treo’s software interface will be different from those of other Windows licensees, because they must follow Microsoft’s strict implementation guidelines, while Palm negotiated an exception to Microsoft’s licensing requirements that allows it to design the Treo’s software so that using it feels like a Palm experience.

And Microsoft wasn’t Palm’s only new-found partner either. Continuing to act on its new strategy of finding the best software for its Treo smartphones, it agreed, within weeks of its deal with Microsoft, to license technology from longtime rival RIM. Under the deal, Treo owners can use RIM’s BlackBerry Connect software to access their corporate e-mail accounts through a secure connection.

The RIM partnership will enable Palm to market its products to vertical markets, such as government and finance, that have favored the BlackBerry over Palm’s handheld because of its email capabilities, according to Edwards. Palm also benefits from the two agreements because the company’s smartphones can now be sold to businesses that use either Microsoft’s or RIM’s email servers. Noting that Palm does not sell email servers, Edwards says “RIM’s competitor is Microsoft and not Palm.”

The Future

The growth of the smartphone market helped Palm to realize, in 2005, its first yearly profit ($77 million) in five years. The company is now trying to jumpstart its stagnant handheld business with a device that combines video and audio playback with communications and business productivity features.

In May, the company released the LifeDrive “mobile manager,” which includes a four gigabyte hard drive for storing business documents and music and video files. The device also provides wireless access to e-mail through either Bluetooth or Wi-Fi connections. And while other Windows-based hard-drive-based multimedia players from companies such as iRiver, Samsung, and Creative Technology are playback-only devices, the LifeDrive can be used to edit Word, Excel, and PowerPoint files.

The LifeDrive could stoke consumer interest in mobile video devices, but its $499 price tag may be a barrier for many people. The device is based on the Palm OS version 5.4, but Palm is leaving the door open to moving to a competitor.

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