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Palm will consider a variety of operating systems for future LifeDrive products, which could take many forms, according to Palm president Ed Colligan. He says the original handheld information organizer concept “has run its course relative to new interests” in multimedia. Palm will develop additional mobile computing products for playing digital media, which means competing with Apple’s iPod.

The market will decide whether smartphones or handhelds become Palm’s biggest sellers. Another big question: How will Palm be affected by its newfound reliance on Microsoft? By embracing Microsoft, Palm is now funding two sides in the battle for mobile software dominance.

Palm still uses the Palm OS on its LifeDrive, Zire, and Tungsten handhelds, and will likely use the software on at least some of its future products. In May, Palm signed a five-year contract worth at least $148.5 million to continue licensing the Palm OS from PalmSource.

Moving the Treo to Windows, however, increases the likelihood that Microsoft will become the leading mobile computing software company, according to software developer Edwards. What’s more, troubles at PalmSource could eliminate one of Palm’s options and require the company to rely on a Windows platform shared by many competitors.

PalmSource’s prospects are an open question. In addition to suffering Palm’s partial defection, PalmSource also lost business from Sony, which stopped selling the Clie in the United States in 2004, and multimedia handheld maker Tapwave, which went out of business in July 2005.

However, PalmSource added a licensee in July 2005, when Korean company LG Electronics decided to use the Palm OS on its future smartphones. In September, the company was acquired by mobile software developer Access Corporation of Tokyo, which may give it a stronger financial backing. Palm has a positive relationship with Access, according to Murray, having previously licensed the Blazer Internet browser from the company.

In sum, Palm’s future depends on fundamental questions about the market for PDAs. Will the smartphone establish itself as the single device that people carry, or will consumers continue to prefer to tote a second device as well, such as a music or video player? Secondly, will Palm’s relationship with Microsoft remain strong? And, finally, will there be a legitimate resurgence of handheld business for Palm, or will the company need to succeed mostly with smartphones? Whatever the answers, if the past nine years are an indication, Palm will not hesitate to make drastic changes to its business model, if it feels the answers to those questions demand it.

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