Palm Taps Microsoft

The PDA makers plans to unveil a Treo powered not by the Palm OS software but by Microsoft’s Windows Mobile 5. Could be a good move

Is the Palm software that powered the first practical handheld in 1996 and redefined mobile computing on the road to oblivion? It sure looks that way, at least for devices such as Palm’s popular Treo, which combines voice and e-mail service with the traditional contacts and calendar functions of a personal digital assistant (PDA). Palm (PALM ) will soon announce a Treo powered not by Palm OS software but by Microsoft’s Windows Mobile 5. And while Palm will sell both Palm OS and Windows Treos for the indefinite future, Microsoft (MSFT ) software is likely to dominate the market over time.

The sale of PalmSource, the software arm spun out of the former Palm Computer in 2002, will also affect the future of Palm OS. PalmSource had been struggling both to find more customers and to get its products, particularly a simpler operating system for cell phones, to market. Earlier this year, it sold its share of the Palm trademarks back to the hardware arm and put itself up for sale.

As the only significant licensee of Palm OS, Palm Inc. was widely expected to buy back the software business — and it tried. But major U.S. and European handset makers jumped into the bidding and drove the price too high. (more…)