Bill Gates has Palm in his Pocket

Palm's new Treo smartphone will use Windows mobile software from Microsoft.

Bill Gates said that the Windows Treo device would serve as his primary mobile phone.

September 27 2005 - In a long-expected announcement Palm CEO Ed Colligan said Monday that the Microsoft Windows Mobile 5.0 operating system was chosen because it offered features that PalmOS could not.

Colligan stood beside former rival Microsoft chairman Bill Gates, and Verizon Wireless chief executive Denny Strigl in San Francisco.

The decision is a victory for Microsoft Corp. and a setback for the company Palm spun off to develop and sell its original operating system.

Colligan said the PalmOS will remain part of Palm's future, but industry insiders predict a successful Palm-Microsoft partnership could mean that palmSource will lose its most significant and oldest customer.

Denny Strigl of Verizon Wireless, Bill Gates of Microsoft, and Ed Colligan of Palm (L-R), after announcing an alliance among the three companies with the Treo smartphone

For more than year, analysts have expected Palm to team up with Microsoft and effectively snub palmSource. The two were once part of the same company until management decided in 2003 to break them up so the software division could sell PalmOS to other handheld makers.

After the split, Palm agreed to pay palmSource a licensing fee for the PalmOS and became its marquee client.

Ross Rubin, director of industry analysis at NPD Group says the Windows Mobile platform offers better support for such things as video and photos. It also offers superior call management. "One of the criticisms levied at PalmOS is that it isn't great for managing voice applications. Microsoft treats voice as a first class citizen."

In 2000, Microsoft had about 11 per cent of the handheld market. By 2004, the Redmond, Wash.-based company had overtaken palmSource. In the second quarter of this year, about 56 million Windows smartphones were shipped compared to 48 million phones with the Palm operating system.

Palm Teams Up With Microsoft.