Tradingchance Handspring(HAND)

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   Handspring and Sprint Developing CDMA Version of Treo Communicator

       
    TUESDAY, MARCH 19, 2002 8:01 AM
    - PRNewswire

    Companies Enter Joint Branding, Marketing and Distribution Agreement For New
       Treo That Will Operate on Sprint's Third Generation Network In The U.S.

   MOUNTAIN VIEW, Calif. and KANSAS CITY, Mo., March 19 /PRNewswire- FirstCall/ --
   Handspring (HAND) and Sprint (FON) (PCS) today announced an agreement to work together on
   a new CDMA version of the Handspring Treo communicator that will operate on Sprint's Third
   Generation Network, which is expected to launch nationwide mid-2002. The product will be
   co-branded and jointly marketed by Sprint and Handspring. The companies plan to sell the
   product initially through Sprint's wireless distribution channels and on Handspring.com beginning
   this summer.

   Sprint, which operates the largest all-digital, all-PCS nationwide network and is the fastest
   growing wireless carrier in the U.S., and Handspring, an innovative leader in personal
   communicators and handheld computers, will work closely together to create national marketing
   campaigns, distribution and channel programs, and customer service and support plans. The joint
   efforts will be designed to educate customers about the distinct features and functionality of the
   new Palm OS-based integrated product and 3G capabilities of Sprint's network to create the best
   possible customer experience.

   Handspring Chief Operating Officer Ed Colligan said, "This agreement with Sprint is a hallmark for
   Handspring as we establish momentum with our Treo communicators. Sprint's expertise in
   developing and deploying state-of-the-art network technologies is a strong match for our innovative
   approach to communications products. We have a shared vision of what communicators should
   do for people, and a shared commitment to making rapid progress in the category."

   "Our relationship with Handspring will enable Sprint to offer another compelling product in the
   category of converged wireless devices that is also compatible with our Third Generation
   Network," said John Garcia, senior vice president, sales and distribution, Sprint's PCS division.
   "We are working together to develop a compact yet full-featured CDMA version of the Treo that
   appeals to customers that want a smart device that meets both their voice and data needs."

   Treo combines a phone, and wireless applications like Internet browsing, email and messaging,
   and a Palm OS organizer into a single compact device - one of the smallest products in its
   category. Sprint will integrate its suite of business solutions and products into the new CDMA
   version of the Treo, including Sprint PCS Business Connection(SM) Personal Edition. It will also
   be designed to take advantage of Sprint's Third Generation Network, which is expected to launch
   nationwide in mid-2002, providing faster connections and greater bandwidth for data applications.
   The companies will disclose information regarding specific product features, capabilities and
   pricing when the product is ready for launch this summer.

   "Sprint continues to offer one of the richest and most technologically advanced selection of
   devices, along with the clarity of an all-digital network that uses the same technology nationwide,"
   said Jay Highley, vice president, business marketing, Sprint's PCS division. "With the enhanced
   speeds and capabilities of 3G, this smart device is positioned to be a critical tool -- whether it's to
   boost productivity as part of a Sprint PCS Clear Wireless Workplace(R) solution, or to simply help
   manage everyday transactions, schedules and sharing of information with friends and family."

                                       So far, so good. Treo, which went on sale in Europe in December and in
                                       the U.S. in February, has received glowing reviews [see BW Online,
                                       12/17/01, ``Finally, a Hybrid That Really Works'']. Now comes the
                                       tricky part. Analysts' projections for 2003, when Handspring is looking to
                                       have Treo gain traction, are wildly divergent. Some expect the company
                                       to earn profits of just a penny a share, while others are projecting profits
                                       of as much as $0.15.

WAIT AND SEE. It all depends on whether consumers are willing to spend $400 for Handspring's latest brainchild. ``This is a
tension stock. We won't know if we have a huge hit on our hands for a couple of months,'' says Charles Wolf, an analyst with
Needham & Co.

Investors certainly have good reasons to join the cult of Handspring. Its stock took a hit in 2001 along with the rest of the
handheld market [shares traded for as much as $22.60 as recently as last May]. Its price has been hovering at around $5 or $6
a share, which looks cheap by historical standards.

Treo has also been widely hailed as the best hybrid phone/organizer to date. At 2.7 inches wide and 4.3 inches long, it's slightly
smaller than standard Palm handhelds. But it can make calls, send e-mail, and keep track of appointments and contacts. Users
can choose between a conventional QWERTY keyboard, which they tap with their thumbs, or the traditional Palm stylus.

BusinessWeek's Stephen H. Wildstrom called the Treo a ``marvel of thoughtful design'' while The Wall Street Journal's Walt
Mossberg proclaimed it a ``terrific product perfect for both phone-centric and data-centric people who want it all.''

PALM'S PIONEER. Then there's the track record of Handspring founder Hawkins, who created Treo as well as the Visor
organizer before that. In 1994, when PC makers such as Apple had washed their hands of personal digital assistants, Hawkins
set to work designing a little something called the Palm Pilot -- small enough to fit in your pocket and powerful enough to store
thousands of addresses. The product launched in 1996, and within 18 months it had shipped 1 million units -- making it the
fastest-selling computer product in history.

Hawkins, along with partner Dubinsky, left Palm in 1998 after disputes with owner 3Com, which had earlier acquired Palm.
The two launched Handspring and once again became the industry's innovators. Visor included add-on ports that let users
attach components, such as a digital camera, to their PDA. At the end of 2001, Handspring had grabbed 15% of the market,
according to NPD Intellect, a market research firm in Virginia. Palm's market share fell from 71% to 58%.

A tough 2001 forced Handspring to innovate again. Demand for handhelds fell sharply in the spring as the economy slowed.
Prices also fell precipitously -- thanks in large part to inventory problems at Palm and a glut in components. According to NPD
Intellect, the average price of a handheld computer fell from $260 in 2000 to $218 in 2001. Discounting quickly ate into
margins.

WELL-TIMED LAUNCH. Handspring had to follow suit in the price wars or eat its inventory. In its second quarter, which
ended Dec. 31, gross margins were just 16.9%, down from 31.4% in the year-earlier period. Operating margins fell to -21.3%
from -8% in the year-earlier period.

Given Handspring's recent troubles, Treo's launch certainly appears well timed. Research firm International Data Corp.
estimates that the market for ``smart phones'' is about to bloom. It's predicting that 2 million devices will be sold in the U.S. in
2002. Worldwide, sales are expected to range between 7 million to 8 million.

Handspring already has deals with eight carriers around the globe, giving it access to 40 million to 45 million consumers. If
Treo, which retails for $399, grabs even a small portion of those customers, Handspring's revenues and margins will soar. Wit
Soundview analyst Mark Specker estimates that gross margins will hit 30% by December, though other analysts put the
number somewhere in the high 20s.

TAKING ON GIANTS. This won't be a cakewalk, however. Handspring is introducing an innovative product in a crowded
sector populated by powerful rivals. ``It's not just a convergence of technology but a convergence of the competition,'' warns
IDC analyst Alex Slawsby. With Treo, Handspring goes up against mobile-phone giant Nokia's Communicator, Samsung's
I300, and Kyocera's Smartphone -- not to mention the latest BlackBerry, the 5810, which launched on Mar. 4. [Though
Palm's i705 has wireless data access, it does not offer voice communication.] These giants aren't going to simply cede the
high-end market -- especially as they're now facing slackening demand.

According to research firm Gartner Inc., mobile-phone sales fell for the first time in 2001 by 3.2%. Total unit sales were 399.6
million, down from 412.7 million in 2000. ``It's a great product but, at best, they have a short-term lead. They'll have their
hands full fighting off the competition,'' says Andrew Cole, a wireless analyst at strategy consultancy Adventis.

Already, a common refrain from users is that they can't imagine living without their Treos. But how many people -- or
corporations -- are willing to shell out $400 for a very sophisticated cell phone? Handspring could see sales stalled by the high
price. It's not deterred, however. Says Brad Driver, director of investor relations: ``The transition to the communicator business
gives Handspring a much bigger market opportunity, higher price points, and higher gross margins.''

Lucky for Handspring, it has enough cash to be patient. In January, it raised $57 million. Moreover, analysts insist that in this
sector, style and innovation reign. ``Handspring's culture is one of change and adaptation,'' says Thomas Sepenzis, an analyst at
CIBC World Markets. ``They have a seasoned, passionate management team. And in the end, you always bet on the
management.'' And that may be enough to help Handspring devotees keep their faith.