ive years ago this month, Palm Pilot developers Jeff Hawkins and Donna Dubinsky introduced their device while Palm was still a division of U.S. Robotics Corp. Powered by triple-A batteries, the Pilot featured just half a megabyte of memory and performed only the limited tasks of data organization and manipulation.

Indeed, even as the features of personal digital assistants (PDAs) continue to improve, the most impressive characteristic of both the Palm and Handspring lines is their simplicity.

"The product design philosophy at Palm is very Zen," said John Cook, a senior director of product marketing for Palm (Santa Clara, Calif.). "As we develop products, we try to decide what's important to the consumer, and usually, what we leave out of the platform is more important than what we leave in."

At a time when major PC OEMs are warning of lower earnings and announcing layoffs almost daily, and as unease surrounds the nascent "information appliance" market, that simplicity is more than just a breath of fresh air-it's a sound business decision. "The success of the Palm PDA has been tied to its utter simplicity," said Bill McClean, president of research firm IC Insights (Scottsdale, Ariz.), who called the Palm Pilot and its iterations "easily the most popular PDA today."

In fact, according to IC Insights, of the overall $2 billion PDA market in 2000, an amazing $1 billion in revenue belonged exclusively to Palm, a company whose name-like Kleenex or Coca-Cola before it-has become synonymous with the type of product it makes. That overall sales figure of $2 billion includes more highly integrated platforms, like handheld PCs such as Sharp's Mobilon HC-4600, information appliances like Compaq's iPaq and smart phones like Nokia's 9000 Communicator.

Long move to color
"Some criticized the company for taking so long to move to color in March 2000; but the company stuck with its 'simple-is-better' strategy, and migrated only after chip speeds and battery power improved," McClean said.

That simplicity can be appreciated from both a hardware and software perspective. The Palm OS, orchestrated from the ground up by Hawkins with only PDAs in mind, has been licensed to Motorola, Nokia, Sony, Symbol, TRG Products and, not surprisingly, Handspring (Mountain View, Calif.).

In stark contrast is Microsoft's Windows CE operating system, which critics say tried to do too much by packing too much functionality on the platform. "The initial version of Windows CE became more notable for its limitations than for its features," McClean said. "1.0 attempted to do too much, making it bulky, inefficient, unpopular. And Version 2 is still not very successful."

On the hardware side, both Palm and Handspring say they must eschew the "technology for technology's sake" aesthetic in favor of more pragmatic, consumer-driven decisions. "We're really not a technology-driven company," said Greg Shirai, director of Handspring Inc.'s Visor product line.

"There's this concept called the death spiral, that we're very sensitive to," Shirai said. "If we think, technologywise, lets add a bigger color screen, and then, to compensate for the sluggish performance resulting from the bigger screen we'll add a faster microprocessor, and to make the battery last longer, we'll throw in a bigger battery . . . In the end, you're just trying to compensate, and you end up with a very heavy, expensive product that nobody wants to buy.

"Handheld devices don't try to replicate the desktop PC, as Win CE products tried to do," Shirai said. "I think that's why some of those information appliances were not successful."

This dedication to simplicity is ironic, given that when PDAs first hit the market five years ago, they were looked upon as the next great "gee-whiz" toy. "They've gone from standalone units that were viewed as toys, to becoming an indispensable tool for some people," Cook said. "That whole market is a bit of a Trojan horse, really. People no longer see a Palm and say 'why do you have one of those?' Now, they ask 'why don't you?' "

Given the near-ubiquity of PDAs, classifying them as an emerging market may seem like a contradiction. But factor in projected growth rates, and the picture becomes quite clear: Market research firm IC Insights forecasts that the PDA sector will grow 26 percent annually, from an $875 million market in 2000 to a $2.2 billion market by 2004. EBrain Market Research estimates that total PDA unit sales in 2000 totaled 6.1 million, a 50 percent increase over 1999. The research firm expects more of the same for 2001, where unit shipments will likely top out at 9.6 million units.

Despite the Zenlike simplicity of the hardware platform, demand for PDAs is likely to expand into applications, services and functionality, to a point where specific distinctions among smart phones, information appliances and PDAs begin to blur. Faster processors, more memory and larger, more brilliant color screens are obvious goals, but the key to growth for the PDA market may lie in the area of wireless communications.

"Both voice as well as wireless data access will become increasingly important, and they'll become more integrated into these devices," Shirai said.

Wireless expansion
Palm and Handspring's latest high-end models, the Palm m505 and the Handspring Visor Prism, boast many of the same features, including a 16-bit full-color screen, a 33-MHz Motorola DragonBall VZ processor and 8 Mbytes of RAM memory. But it's the PDA's potential for expanding a system that will likely make or break it.

"I think the key differentiator for us has been to bring expansion to the platform," Handspring's Shirai said. "Jeff and Donna realized that you can't integrate a pager, cell phone, streaming video and the like and still make a great product. So we thought we could develop a platform on which you can easily expand your basic organizer."

That platform, Handspring's Springboard module, allows users to plug and play mostly third-party hardware and software upgrades, turning the Visor into a hybrid digital camera, global-positioning system receiver, pager, modem, MP3 player, voice recorder and game board, allowing larger form factor add-ons than competing expansion schemes.

"Unlike other slot schemes like PCMCIA and CompactFlash, Springboard has no functional limit on the size of an expansion card, which allows for large battery-powered add-ons, like digital cameras and cell phones," McClean said, calling the Springboard Handspring's "most notable difference" from Palm. In fact, just this month, Handspring's VisorPhone-a Springboard extension that, in addition to acting as a phone, can send text messages-hit the retail shelves.

But in terms of third-party support, Palm outnumbers Handspring, notching more than 150,000 third-party developers. "We call it a Palm economy," Cook said. "In some ways, it's bigger than Palm itself." High-end Palm models feature two expansion slots, one at the bottom of the system for wireless modems or cameras or MP3 players, and one at the top, called a Universal Connector, for secure digital and multimedia cards.

Although expansion slots were not designed into the original Palm platform, the company sees these slots as the tip of the iceberg for PDA wireless connectivity options, where an "always on" Internet connection will replace current Internet access add-ons. "The Palm 7x has a two-way radio built into it, so there are options now for full-time Internet connection," Cook said.

"In five years, I think always-on access to the Internet is going to be a given. But the biggest differences, five years from now, will be more in the software and services side than it is in hardware," Cook added.

Be that as it may, increasing the functionality of a system will take its toll, and a 33-MHz processor, which both companies use via Motorola's DragonBall line, may begin to run out of gas sooner rather than later.

The PDA world is paying more attention to ARM processor technology which, having achieved stunning success in the cell-phone market, is enjoying a second life inside Internet appliances such as Compaq's iPaq and Hewlett-Packard's Journada 720. Both of those devices use a 206-MHz StrongARM processor from Intel, while Psion's Series 7 uses a 133-MHz version, underscoring the difference between Internet appliance and PDA functionality.

Pressure from OEMs like Palm and Handspring, which account for hefty DragonBall sales, forced even Motorola to pay attention to ARM. Deciding that "if you can't beat them, join them," Motorola licensed the ARM architecture and plans to develop a hybrid that would pack more punch and provide a greater degree of scalability than its aging DragonBall line.

Gateway to wireless
"When the first DragonBall was announced five years ago, nobody talked about what a Palm was," said Kyle Harper, business manager of emerging markets for Motorola's wireless communications division. "ARM provides a gateway to the wireless community, and we think that's extraordinarily critical to the end-user PDA space." Priced at about $10 per unit, the DragonBall processor combines power-saving features, UART with IrDA support and an LCD controller.

Palm, for its part, remains noncommittal about its direction. "One of the things I find very interesting is the array of options going forward as we move over to the ARM world," Palm's Cook said, without providing details. Handspring's Shirai echoed that sentiment. "We're gleaning new generations of DragonBall, as well as considering ARM," he said.

According to IC Insights, the market for PDA ICs will grow significantly in the coming years. The market researcher estimates that the average IC content for a typical PDA, in terms of dollars, is about 42 percent, corresponding to a 2000 PDA IC market of $875 million. With an average annual growth rate of 26 percent, the PDA IC market is expected to reach about 2.2 billion by 2004, spelling good news for the semiconductor sector.

Still, the recipe for Palm and Handspring's success will continue to focus on simplicity, proving that technology for technology's sake is often irresponsible and always a commercial dead end. "The key to our success has always been the human factor," said Palm's Cook.