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Palm Pushing Up BlackBerries

Updated from 12:05 p.m. EDT

Palm's (PALM) Treo smartphones will soon be serving up BlackBerry.

As part of a deal announced Monday by the gadget maker and Research In Motion (RIMM), Palm-based smartphones will offer software that will be able to connect with RIM's BlackBerry servers. The software, which Palm will start offering on its Treos early next year, will let users have their email "pushed" via the BlackBerry service to their phones.

The companies did not disclose the financial terms of the deal, but investors still reacted positively. In recent trading, shares of Palm were up 85 cents, or 3%, to $27.58, while RIM shares were up $1.13, or nearly 2%, to $65.14.

To date, the primary way of connecting with RIM's BlackBerry email service has been via its BlackBerry pagers and smartphones. And in recent quarters, handset sales have become the predominant part of RIM's revenue base.

But with the company seeing increasing competition on the server front, it has moved to broaden access to its BlackBerry email services to other handheld devices through its BlackBerry Connect service. The move is seen as a way of defending its server sales, which are not only high-margin, but also the linchpin of the company's strategy.

Although RIM has been pushing its BlackBerry Connect service for some time now, until recently it had seen little success in convincing other handset makers to incorporate it in their phones and pagers. In the last several months, however, companies such as Nokia (NOK - Get Report) and Sony Ericsson, the Sony (SNE - Get Report) and Ericsson (ERICY ADR) joint venture, have announced new devices that employ BlackBerry Connect.

Prior to this deal, Palm had offered push email software for the Treo from RIM rivals such as Good Technology and Intellisync (SYNC - Get Report). Push email services automatically forward email from a server to a handheld device without a user having to press a button to retrieve new mail.

Palm will continue to offer push-mail software other than BlackBerry Connect for its Treos, said Page Murray, vice president of marketing at Palm. Some of Palm's most important enterprise customers are using Good's push-mail service, Murray noted.

"There's no one-size, one-flavor solution. Flexibility and options are good," Murray said.

Murray and Palm declined to say whether the company would extend the BlackBerry Connect service to its upcoming Windows Mobile-based Treo. That device, which Palm announced last month and which is due out early next year, will be the first made by Palm to include Microsoft's (MSFT - Get Report) handheld operating system. Many analysts had seen that device as a significant threat to RIM, as it will combine what is widely considered the best smartphone on the market with built-in push-mail access to Microsoft's dominant Exchange email servers.

"Nothing" -- no contractual or technical issue -- would prevent Palm from incorporating BlackBerry Connect on the Windows Mobile-based Treo, said Murray, but he added, "We can't talk about whether are or not we are doing it."

Former Palm sibling PalmSource (PSRC), announced a deal with RIM last year to incorporate BlackBerry Connect into the Palm operating system. Despite being PalmSource's primary customer, Palm declined to follow that lead until Monday's deal.

PalmSource said in September last year that it had released software that would allow Palm OS licensees to incorporate BlackBerry Connect into their products. But Palm developed its own software for the Treo to link to BlackBerry Connect, not PalmSource's, said Murray..

"I don't believe PalmSource's software resulted in a product that would be commercially viable," he said. "There was nothing that would pass RIM's standards or the standards of handset manufacturers."

Palm decided to move without PalmSource's help, because, "We have real customers on the line and millions of handsets to sell," Murray said.

Representatives for RIM and PalmSource didn't immediately return calls seeking comment.

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