Palm hit by operating system delays

Stuart Corner
Wednesday, 02 August 2006 05:50

IT Industry - Strategy

PDA maker Palm has revealed that the company responsible for the Palm operating system has failed to meet deadlines for delivery of the next version.
The Palm devices and operating system were originally manufactured by one company, Palm, but in 2001 Palm spit off the OS division into a new company, PalmSource, which has since been acquired by Japanese company Access.

In is annual report, filed with the SEC on 28 July, Palm revealed that PalmSource had failed to meet certain of the milestones under the co-development agreement for the next generation Palm OS "relieving us of our obligation to make minimum royalty payments".

Palm said it was  in negotiations with PalmSource to expand our development and distribution rights to the current version of the Palm OS," but if it was unable to successfully conclude these negotiations, "[this] may adversely affect our ability to develop and distribute new products based on a next-generation version of the Palm OS."

The company said that regardless of the outcome, "we will continue to release new products based on the current version of the Palm OS."

In January 2006 Palm released its first PDA based on the Microsoft Windows Mobile operating system, leading some commentators to pronounce the PalmOS dead, but a reading of the Palm annual report suggests these suggestions are somewhat exaggerated.

The company said that "Our product strategy is substantially dependent on the Palm OS...[and] while we began shipping, in January 2006, a product which utilises Microsoft's Windows Mobile operating system, most of our products remain based on the Palm OS."

In short even if there is a planned transition To Windows Mobile it would take some time. Meanwhile the company is contracted to its co-development arrangement with PalmSource, and to paying royalties to 2009 and to making a minimum repayment regardless of the volume of products shipped with the Palm OS, so long as PalmSource does not continue to be in breach of the agreement.