Handspring Looks to First-Timers to Improve Its Margins

Updated from 12:37 p.m. EDT

Bells and whistles and gadgets have captivated the attention of handheld computer makers over the past few months. But for Handspring (HAND Quote), its latest organizer, an updated but stripped-down organizer called the Treo 90, which targets the first-time buyer, may be its best shot at reaching profitability by the end of this year.

In a way, the Treo 90, which includes a color screen, keyboard, and for the first time, a Secure Digital expansion slot, and which retails for $299, is a small concession that it can not yet abandon the market that helped them swell from a seedling in Palm Computing (PALM Quote) expats Jeff Hawkins and Donna Dubinsky's minds to a No.2 contender for the handheld crown. In January, co-founder Dubinsky shocked investors after announcing it planned to transition the product portfolio away from standalone organizers, betting the bank on the hope that consumers are looking for devices that converge wireless data, voice and organizers. Very quickly, Hawkins revised those statements, explaining that the company did not intend to drop entirely the Visor line, but rather, focus its growth on wireless-enabled products.

All of this makes today's announcement, while not entirely unexpected, a bit of a head-scratcher. The answer lies in part on addressing consumer spending habits and in particular on how to do it without losing its shirt. While handheld makers continue to pack more features -- and cost -- into their devices, studies show that lower-priced models continue to account for most of the sales. In March, nearly 90% of handheld retail sales came from PDAs priced under $400, according to NPD. Palm (PALM Quote) addressed the market in the spring with the launch of its m130 color handheld. Even the typically higher-end and higher-priced PocketPC camp is scraping the bottom end of the market for sales? Toshiba launched its under-$400 e310. Handheld manufacturers have come to realize that consumer adoption of next-generation do-it-alls have been slow, owing partly to the slower-than-expected deployment of next-gen wireless services. Since launch, Handspring said it has shipped 47,000 units to retailers, but only 13,000 have actually sold to consumers. ...