A Win For PalmSource, A Loss For palmOneA Win For PalmSource, A Loss For palmOne

OK -- I was wrong. I predicted Motorola was the mystery licensee for the Palm OS and it turned out to be Korea's LG Electronics. That's good news for PalmSource but not such good news for its one-time sibling, palmOne.

It's good news for PalmSource because it represents a major win for its platform at a time in which a win is desperately needed. Signing LG, along with the port of the Palm OS to Linux, means that PalmSource has a good chance of staying alive and relevant in the mobile industry.

But this doesn't represent good news for palmOne (which will be renamed Palm next week), which has been kept profitably afloat by sales of its Treo smartphone. The Treo is a delightfully designed device and it benefits greatly from the simplicity and familiarity of the Palm OS. As such, palmOne has benefited greatly from the fact that the Treo is the only Palm OS smartphone widely available.

That now looks to change. Even worse, LG is a hard-nosed competitor with a good reputation among consumers and an in with many major cellular operators. It's not hard to envision LG low-balling its Palm-based smartphone, which would very much put the hurt on the Treo.

This means significant competition for palmOne's broadly successful product, a product that is responsible for a large percentage of the company's sales and profits. So what's palmOne to do?

I go back to a previous my previous blog in which I said that, if I were running the show at palmOne, I'd ship a Windows Mobile version of the Treo and also offer a low-cost version. The Windows Mobile version would make palmOne relevant again in the enterprise and the low-cost Palm-based version would be a horizontal product that would appeal to a mass market. And, now, that low-price version would compete against LG's Palm OS offering, whenever that is released.

I keep coming back to the Palm OS/palmOne saga (or is it a soap opera?) both because it is a fascinating business study and because I like Palm-based devices and advocate as much marketplace competition as possible. This latest news provides a real plot twist that will undoubtedly play out in some very interesting ways.