Motorola Droid Lands Hard on Palm

NEW YORK ( TheStreet) -- Motorola Droid's lukewarm splashdown in the smartphone market may have caused only ripples at rivals Apple ( AAPL) and Research In Motion ( RIMM), but it may have tossed Palm ( PALM) out of the pool.

Motorola's ( MOT) Droid, the big touch-screen phone that made its closely watched sales debut at Verizon ( VZ) stores earlier this month, arrived to a mixed reception. It was quickly apparent that the $200 device, powered by Google ( GOOG) Android technology, wasn't going to immediately -- or possibly ever -- knock the iPhone off its pedestal.

Droid has a brilliant screen, a slide-out keyboard, the most advanced Android operating system available and enough applications to keep many mobile users happy with their new attractive pocket computer.
Motorola Droid

Droid is many things, but it isn't a blockbuster.

Though Verizon very much hopes the Droid is cool enough to keep its customers from fleeing to AT&T ( T), Apple iPhone devotees, the target market for dazzling new gadget, won't find the Droid a must-have item.

Research In Motion, the No.2 smartphone maker, had reason to fear the Droid's arrival. Big telco partner Verizon was pouring its biggest marketing investment into the Motorola phone, a move that could only serve to push the BlackBerry aside.

But RIM has its own strong following and new phones like the BlackBerry Storm 2, Tour and Curve models may be a way of keeping fans happy.

Droid, as it turns out, is also not a big threat to BlackBerry because it doesn't work behind the corporate firewall like RIM does. Droid is designed to sync with Microsoft ( MSFT) Exchange, the top business email server. But to do so securely, IT departments need to buy additional security systems to make it happen.

How big of an obstacle is that? Just ask Apple.

Starting more than two years ago, with the original iPhone, Apple preloaded Cisco's ( CSCO) VPN security software so office workers could connect via iPhone. Yet even with that head start, the iPhone has yet to really crack the corporate market. The resistance is due largely to BlackBerry's dominance and also the annoyance of having to set up additional security.

RIM looks good in this light, since the threat to its business customer is minimal and its push into the consumer market hasn't been derailed by the Droid.

The same cannot be said about Palm.

The Palm Pre and now Pixi phones were designed on a new Web OS system that, like Android, was a compelling alternative to the fading Microsoft Windows Mobile and the exclusive RIM and Apple software.

But the Pre phone at Sprint ( S) started with less than a bang and has been nothing but a whimper since.

The Droid's arrival has effectively crowded Palm out of market. And whatever the Droid didn't accomplish, Pre's price cuts and the cheaper Pixi phone will.

-- Written by Scott Moritz in New York.