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But Microsoft had not given up. Last November it released a new version of CE called 2.0, and on Jan. 8 it made a brazen me-too play on Palm's brand name: Microsoft called its new devices Palm PCs. "We were astounded," says Dubinsky. "It was an incredible sign that they felt insecure enough about their product that they tried to leverage our name." Microsoft officials insist that the name is merely descriptive, like desktop or laptop. They may have to defend that stance in court. Last week Palm's new parent company, 3COM, which merged with U.S. Robotics in June 1997 (the deals come fast in the world of high technology), sued Microsoft in Europe for trademark infringement.
Perhaps more troublesome for 3COM and Pilot, Microsoft also announced seven new hardware partners, led by consumer-electronics giants Casio and Philips, that plan to introduce their own versions of Palm PCs in the coming months. Both Casio's Cassiopeia E-10 and Philips' Nino 300 will offer digital voice recording, automatic data synchronization and one-handed operation, among other features.
Palm is sticking to simplicity. Anyone who wants more features, says Dubinsky, can get them from Palm's growing network of 5,000 developers, who are making add-on products such as PilotMail and PilotClock. WinCE 2.0 is clearly an improvement, however, and analysts say it could do well with corporate buyers because of its adaptability. "The first WinCE was a learning experience," says Gerry Purdy, president of Mobile Insights, a market-research firm. That's typical of Microsoft: first get a product out, then get it right. "But 2.0 is a whole new operating system," he adds. If Palm concentrates on expanding its consumer base and Microsoft's partners focus on the business market, both will succeed, he predicts.
Meanwhile, Palm's chief visionary is toting a new block of wood--more research for a future product. "Am I worried?" Hawkins asks. "Sure, I worry all the time. I'd be foolish not to think about the competition. But I still feel we'll be successful against them. They just don't get what makes this business tick, and they're going to fail." He believes there will be plenty of opportunities in the future for pocket-size--or smaller--consumer devices that can access information. Plenty of competitors too, but Palm will be up to the task, Hawkins says. "We're just getting started here." And he still has plenty of wood in the garage.