Palm release: We have the OS back

December 14, 2006, 10:14 AM UTC
Fortune

Below is a press release Palm issued last week to little fanfare. For Palm watchers and Treo fans though, the news is quite significant: Palm has bought back its software independence, which should allow it to innovate much faster. My commentary is also below.

SUNNYVALE, Calif., Dec 07, 2006 (BUSINESS WIRE) — Palm, Inc.

(PALM) today announced it has signed an agreement with ACCESS

Systems Americas, Inc. (formerly PalmSource, Inc.) to license the

source code for Palm OS Garnet, the version of the Palm OS used in

several Treo smartphone models and all Palm handheld computers.

Under the agreement, Palm has a perpetual license to use as well as to

innovate on the Palm OS Garnet code base. Palm will retain ownership

rights in its innovations.

This is what I suggested in October that Palm needed to do.

The new agreement also provides Palm flexibility to use Palm OS Garnet in whole or in part in any Palm

product, and together with any other system technologies. The company

plans to ensure that applications now compatible with Palm OS Garnet

will operate with little or no modification in future Palm products

that employ Palm OS Garnet as the company evolves it over time to

support Palm’s product differentiation strategy.

In addition, Palm has secured an expansion of its existing patent license from

ACCESS to cover all current and future Palm products, regardless of the

underlying operating system.

I believe the translation here is that Palm is developing its own next-generation operating system, and it will include multi-tasking and all the other 3G and multimedia goodies the Palm community has been awaiting for so long. Now Palm has the essential ingredient it was missing: the new OS can be backward compatible with Garnet.

For all of these rights, Palm will pay ACCESS a total of $44 million, which will be paid in Palm’s third

quarter of fiscal year 2007, and will be recognized as an expense over

the next several years. This single payment eliminates the requirement

for Palm to pay ACCESS continuing royalties of 10s of millions of

dollars over the coming years.

In a way, this is a bargain. But when you consider that Palm once owned the Palm name and built this operating system, it seems kind of a shame that it’s taken all this time and effort to buy its own stuff back.

This agreement gives Palm increased ability to innovate on the Palm OS Garnet base, and to

effectively differentiate Palm products long into the future,” said

Mark Bercow, senior vice president of business development at Palm,

Inc. “We value the Palm OS development community, and are very

committed to our loyal base of Palm OS customers, all of whom will

benefit from the agreement just concluded with ACCESS.”

Just as it will continue to enhance Palm OS, Palm will continue to support and

further innovate on its implementation of Windows Mobile 5.0 Pocket PC

Edition, which it licenses from Microsoft. By supporting both operating

systems, Palm gives its customers — from carriers and enterprises to

consumers and small businesses — a choice of operating environment.

This will put Palm in the tough position of selling a home-grown OS and Microsoft’s on devices that are otherwise very similar. In the past, the argument was different; the Palm OS was developed by an outside party, so Palm could argue that it was good for some things and Microsoft’s software was good for some others.