Palm Goes Low-Tech With Latest Gadget

Peering into Palm's(PALM Quote) future may seem a lot like a trip down memory lane, as the struggling company prepares to launch its first new device since it revamped its strategy in December.

Palm is going decidedly low-tech with the introduction of its $99 Palm Zire, rather than attempting to jam as many gee-whiz functions into the smallest amount of space as possible. The old-fashioned Zire is Palm's lowest-priced product to date.

Handheld-device manufacturers increasingly are paying attention to the lower-cost end of the market. Hewlett Packard(HPQ Quote) recently announced it plans to begin selling a $299 version of its Ipaq device, while ViewSonic also announced a similarly priced device. In fact, analysts have suggested that lower-priced handhelds make up between 30% to 45% of the market.

Palm is aiming to undercut the competition on price, by introducing a newly designed device that harkens back to the mid-'90s, when the company created an entire industry by marketing a simple-to-use and pocketable organizer that appealed to technophiles and executives alike.

This generation of handhelds -- the first leg of Palm's new two-pronged strategy -- is targeted directly at the market for soccer moms and Luddites. Handheld-technology companies have left "this first-time user completely out," said Palm's senior director of product management, David Christopher.

However, there's no telling if the company will manage to attract an audience that has turned a blind eye to technology products. Moreover, Palm is unveiling a new product line at a time when the company may be "launching into a headwind because of the economic issues," said U.S. Bancorp Piper Jaffray's William Crawford.

Palm's fortunes have been hit hard of late, dragged down by a string of delays and problems with excess inventory.

But many analysts say the company may be executing a prudent strategy by introducing a cheap handheld organizer as a means to attract a new market as well as maintain its 30%-plus gross margins -- at a time when the economic climate has dampened corporate spending.

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