A Glimpse of Handheld's Future Beats the Present

Heads are spinning over Handspring's (HAND Quote - Cramer on HAND - Stock Picks) PDA and a mobile data-capable phone, all in one lightning bolt of product!

Unfortunately for the handheld maker, that device isn't for sale -- yet.

What Handspring does have for sale are the two new PDAs it brought into a cold, cruel market Monday, both snazzier, souped-up members of the Visor line.

Bound to be the more popular, the lower-end Visor Neo sells for $199 and comes in several spiffy colors for the entry-level consumer. The Visor Pro retails for $299, aimed at a higher-end customer who wants a rechargeable lithium battery and 16 MB of memory, twice that of the Neo.

For comparison, the $299 Visor Edge product released this spring has only 8 MB of memory, but all Palm OS-based handhelds pale when compared with 32 MB and 64 MB storage stockpiles of Pocket PC-based devices such as the Compaq (CPQ Quote - Cramer on CPQ - Stock Picks) iPaq. Nonetheless, together the two make solid additions to a PDA market that has done everything but twirl flaming batons to get a rise out of consumer spenders.

The twins probably were intended to be announced at last week's CTIA trade show, but instead debuted into a huge market downdraft that docked parent Handspring over 4% to $2.21 and sent competitor Palm cascading 15.14% to $2.41. There are now seven Visor organizers ranging from $129 from a starter handheld to $399 for a color screen.

There is a minimum of buzz about the two new Visor models for good reason. Two weeks ago the world got an unplanned sneak peek at what Handspring will unveil in the next few months when the FCC posted pictures, specs and names for Palm (PALM Quote - Cramer on PALM - Stock Picks) and Handspring's wireless connected PDA products on the FCC Web site. The companies quickly plucked the data off the site, but the glorious images of slim, futuristic devices -- one potentially a 2.5G mobile phone and the other a BlackBerry rival with wireless email connectivity -- gave the Street the technological leap forward it has been expecting for months.

CIBC World Markets analyst Tom Sepenzis speculates that the Handspring mobile phone and organizer duos, branded as "Treo" on the FCC site, will debut at Comdex in November. As a backup he gives a three- to six-month time frame for the arrival of the next generation of handhelds. Palm's upcoming i705 device is the anticipated Research in Motion (RIMM Quote - Cramer on RIMM - Stock Picks) challenger talked about in recent months as the heir to the wireless Palm VIIx. Like many on the Street, Sepenzis is looking past the Neo and Pro toward the wireless device in the pipeline: "These products will be the last of the nonwireless line. They'll probably do OK, but don't expect huge things," he says.

He lights up, however, when talking about a Handspring phone device that can run over the anticipated general packet radio service (GPRS) networks, or 2.5G, that will offer more efficient and quick access to email and short messaging.

The math alone is exciting: thinking of the hundreds of millions of owners of older mobile phones who could be won over to the GPRS call, all wanting new phones. Nokia (NOK Quote - Cramer on NOK - Stock Picks) hasn't even announced a GPRS phone yet, and the phones aren't expected to ramp into big volumes until 2002 and 2003. Then again, reality sets in.

GPRS has yet to roll out in Europe, let alone the U.S. Handspring faces staggering competition from the manufacturing, distribution and budgets of Nokia, Motorola (MOT Quote - Cramer on MOT - Stock Picks) and Siemens -- it looks more like an acquisition target than a threat to such giants. And we have no firm delivery date for any Handspring phone.

Don Young of UBS Warburg says in a research note, "We expect these products to remain low-volume offerings and only add incrementally to revenues."

Nonetheless, for the first time in a five-month period punctuated by inventory write-downs and price wars, there's something to be excited about in the handheld market. For the meantime, consumers will have to make do with the Neo and Pro.