3Com's new weapon in the battle for a big little market

The Palm Pilot, main challenger to Windows CE handhelds, is being upgraded. Steve Homer gets his mitts on the Palm III

Hot on the heels of Apple's decision to dump the Newton, one of its main tormentors, 3Com's Palm Pilot, revealed itself yesterday in new clothing. The Independent was offered an exclusive preview.

Looking like an updated Star Trek flip-top communicator, the new Palm III no longer feels like a clip-together toy from the bottom of a cornflakes box. But can the improved build quality help it hold on to its market share? Microsoft is gunning for it.

The Palm Pilot has been a huge success. While the Newton, launched in 1993, sold only about 200,000 units worldwide, the Pilot has clocked up more than 1 million in less than two years. Little wonder, then, that Bill Gates has taken an interest.

Apart from its shape, at first sight little has changed in the Pilot III. Information on your PC and Pilot are still synchronised by simply dropping the Pilot into a cradle and pushing a button. You still use the easy-to-learn Graffiti handwriting system to enter and edit data on screen. There is one other obvious difference: the Pilot III now supports infrared communication, of which more later.

Under the bonnet there is more memory, and the operating system has been tweaked to allow a better menu structure and better communications.

However, the subtler changes may turn out to be more important - for example, network support. This has been available in the US for some time, and is now coming to Europe. Synchronisation, the great benefit of the Pilot over the Psion (and the Newton, for that matter), can now be done from anywhere on a corporate network, or even over the Internet. And with its improved operating system, the Pilot III now offers better e-mail facilities. With more than 5,000 people developing applications for the Pilot, the increased memory and improved operating system promise lots more benefits.

But long term, the Pilot is under threat. Microsoft has had considerable success in the US market with its Windows CE operating system in keyboard- based hand-held computers. Psion was once the third-largest player in the US, but has seen its market share collapse to 2.9 per cent, according to the analysts IDC. Psion was not squeezed only by Microsoft, however; the Pilot has an amazing 51 per cent of the US market, and 33 per cent worldwide.

But the Pilot fills a different niche to keyboard-centred devices. And Bill Gates is coming. In January Microsoft announced the cheekily named Palm PC, which runs Microsoft's Windows CE operating system, and was developed solely to attack the Pilot. But Microsoft may not have everything its own way. Palm Computing, the 3Com division that produces the Palm Pilot, has begun legal action in Europe against Microsoft, alleging trademark infringement.

Until the Microsoft product ships, it will be hard to see what the technology can deliver. But the new Pilot does itself no favours by under-using its technology and marketing opportunities, for example the infrared function. The Pilot will use this technology just to swap business cards and files between Pilots. Apparently, it is too difficult to communicate with notebook computers via infrared: too many types of signals are used. Odd, then, that Philips and other Palm PC manufacturers promise infrared synchronisation on their devices.

Then there are more basic questions. Why does the Palm III not switch off when you close the lid? Why not overhaul the application software, which often qualifies for the also-ran prize in this market sector? And why, oh why, no Mac support? 3Com offered Mac facilities on its last version, but Mac support for the Palm III will be offered "at a later date". Even after the demise of the Newton, 3Com officials would not give a firmer message.

The Palm III is a modest improvement on an already excellent product. But 3Com is about to go toe to toe with the most aggressive player in the information technology sector. It probably has a year to build up its marketing muscle; if it doesn't, this could be a one-round fight.

The Palm III will be introduced next month, at pounds 299, inc VAT.