Palm To Microsoft: Windows Mobile Just Isn't Working Out

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Palm dealt Microsoft's Windows Mobile operating system a substantial blow Thursday, with Palm CEO Jon Rubinstein confirming that Palm would no longer develop devices running the OS.

According to Rubinstein, Palm plans to forge ahead with its own WebOS platform.

"Going forward, our roadmap will include only Palm WebOS-devices," Rubinstein said during a quarterly earnings conference call with analysts Thursday.

There are plenty of reasons why the move might be a mistake on Palm's part, but the decision will definitely mean a setback for Microsoft, as Palm will no longer need to pay licensing fees to Microsoft for use of Windows Mobile.

WebOS is Palm's new operating system and appears on both the three-month-old Palm Pre and Palm's upcoming Pixi smartphone, so it makes sense that Palm wants WebOs in full focus.

It's also reasonable to think Palm's looking for money-saving measures after reporting brutal first quarter losses Thursday -- losses in which the only bright spot was Pre catalyzing a 134 percent jump from the previous quarter on the number of smartphone units shipped. And even then, most analysts think Pre sales -- which Palm did not disclose in detail -- were lower than expected and bound to taper off.

The strength of Microsoft's Windows Mobile platform, however, is also up for debate. Windows Mobile has lost substantial market share in the past year, with researchers like Canalys putting the number of phones shipped with Windows Mobile at about 9 percent of the overall global smartphone market. That's a far cry from Nokia (45 percent), Research in Motion's BlackBerry (20.9 percent) and Apple's iPhone (13.7 percent).

Harsher critics, like J. Gold Associates' Jack Gold, have recommended Microsoft divest itself of mobile OSes altogether, and continue to make moves similar to Microsoft's recent alliance with Nokia to bring Microsoft Office and other Microsoft applications to some of Nokia's Symbian-based smartphones.

But at the same time, a number of smartphone makers have announced new devices based on Windows Mobile 6.5, including Sony Ericsson, HTC and most recently, LG Electronics. Those join other units from Hewlett Packard, Samsung and Toshiba. At the same time, Microsoft has been hyping Windows Mobile 6.5 and gearing up for a host of Mobile 6.5-based phones arriving before the holiday shopping season.

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