Personal digital assistant makers are moving out of the kiddie pool. Those making the handhelds at Palm ( PALM), Handspring ( HAND), Sony ( SNE), Microsoft ( MSFT), Compaq ( CPQ) and the like have a challenge in 2002 unlike any year before. No longer is it enough to make small, easy-to-use devices that allow consumers to compute on the go. This year requires an earnest effort to provide wireless communication for the masses, and with that to step out of a smaller market and into the depths of competition with leviathan mobile-phone companies in a monster market. Handheld makers have known their future is in wireless for years. But how will they survive in a struggle against an R&D budget such as the $2.64 billion Nokia ( NOK) spent in 2001? (That number is comparable to Palm and Handspring's
market capitalizations added together.) The answer, of course, is that device makers aren't looking to unseat Nokia but to grab a small part of a huge market. It's a much better fate than eking out an insignificant existence as a niche device, sitting on the sidelines with the Hewlett-Packard graphing calculator. Treo, a combination PDA and phone, has begun shipping in smaller markets -- though the company announced it has had trouble securing enough components to power a larger rollout. Palm last week announced its long-awaited wireless email device with Palm OS organizer capabilities, the i705 geared toward the corporate market Palm has long ogled. Research in Motion ( RIMM), the awkward cousin of the PDA lineup, announced it would add phone functionality to its beloved BlackBerry pager for AT&T Wireless ( AWE), and expand its current BlackBerry deal with the British wireless carrier mm02 from the U.K. to countries across Europe. While the products are exciting, it's the prospect of providing serious alternatives to traditional mobile phones that should give investors the thrill. Handspring announced specifications for its first general packet radio service-capable phone before handset powerhouse Nokia did. BlackBerry is years ahead of phone makers when it comes to providing wireless data, and now Palm's got a jump on them, too. Handspring will be expected to update its Treo, and Palm must come out with a device in 2002 that incorporates voice communication. Microsoft will do the same for Pocket PC-based devices, unveiling its Stinger project to bring calling to the Compaq iPaq, H-P Jornada and others in the middle of 2002. Research in Motion will move from the Mobitex network that currently carries its BlackBerry traffic to GPRS networks that carry mobile-phone calls and messages. Not to mention the well-overdue refreshing of the Palm operating system is expected this fall and will include all the real-time functionality that wireless communication and multimedia need. In that sense, Palm and Microsoft have more control than the rest of the market, with the benefit and pressure of shaping the operating systems that run convergence devices. Investors got anxious in 2001, but in 2002, PDA companies will deliver.