Exec: splitting Palm will avoid Apple's pitfalls

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Dave Nagel, president and chief executive officer of Palm's Platform Solutions Group, doesn't want Palm to make the same near-fatal mistakes Apple has in the past, according to a CNET News article.

Palm, unlike Apple, has split itself into two different divisions: one for software and one for hardware. Nagel feels the move will help Palm keep high market share (it currently has around 75 percent of the handheld market) rather than becoming a "niche" player like Apple, which has around 5 percent of the personal computer market.

Palms' Solutions Group is responsible for designing and delivering the Palm family of products, including the Palm m100 and Palm m500 series handhelds, as well as hardware add-ons, software and accessories. The Platform Group will develop and license the Palm operating system.

"It is straightforward how you do an integrated company like Apple," Nagel told CNET. "You can control everything end to end. You also end up with 2.5 percent market share."

However, some analysts don't think Palm's split is enough to cure its ills.

"I think the company is clearly better positioned (after the) split," U.S. Bancorp analyst William Crawford told CNET. "But that doesn't mean that the challenges go away."

PDA (personal digital assistant) sales plummeted last year. But by licensing its operating system software, Palm will typically collect less than US$10 for each unit with its operating system. Despite this, Nagel has been a strong advocate of splitting the company since he joined the Palm board over a year ago.

Nagel in charge of AT&T Labs and was a senior vice president at Apple and led its worldwide research and development group. He's perhaps best remembered, fairly or not, for spearheading Copland, one of the failed next generation operating systems that Apple attempted before finally succeeding with Mac OS X.

In fact, in August 1995 Nagel told a Macworld Expo crowd that Copland would be in Mac owners' hands by mid-1996. In November, a beta version of Copland went out to developers. But in late 1996, Apple canned Copland.

"Copland was so incredibly ambitious. It took a lot of work to pull it together and try to get it out the door," John Sculley, former Apple chief executive, told CNET. "Apple's efforts to change its OS is a seven- to 10-year job and far more complex" than what Palm is facing.

And Ian Diery, former executive vice president and general manager of Apple's personal computer division, told CNET he wouldn't blame Nagel for Copland's failure.

"He had a difficult job at Apple. He inherited the job of making the OS backward-compatible," he said. "He had to enhance an OS that was hard to enhance. There were a lot of ills at Apple at the time, and I wouldn't put them at David's feet."

However, in the CNET article, Gabi Schindler, who worked with Nagel at Apple and AT&T Labs, offered a different perspective on Copland's failure.

"Dave took a lot of risks with Copland," he said. "He made the mistake of making too many requirements but not having enough (work force) resources."

On the other hand, she added that Nagel was largely able to get projects out the door on time at both Apple and AT&T.

Apple eventually ditched Copland and bought NeXT, using its products as the basis for what we now know as Mac OS X. On Aug. 16 Palm entered into a definitive agreement to buy Be's intellectual property and technology assets. It's not certain yet what the Palm-Be marriage will bring.

Even counting the royalties the Palm hardware unit will be paying to the new software unit, analysts say the Palm OS business is less than a $100 million-a-year business today, although it should reach that level in the next couple of years. But Nagel isn't worried about this. After all, Microsoft does okay selling mostly software.

"There are a lot of analogues in the industry," Nagel said in the interview. "If you look at the set-top box business, companies like Liberate are smaller than that but have significant shareholder value."

This story, "Exec: splitting Palm will avoid Apple's pitfalls" was originally published by PCWorld.

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