Motorola and Palm in Cell Phone Pact

In a move aimed at making wireless Web devices that combine the assets of a cell phone, personal organizer and Internet device in one, Palm, Inc. (Nasdaq: PALM) and Motorola (NYSE: MOT) announced a development alliance on Monday.

The first joint product, a “smart phone,” should be ready in early 2002, the two companies said. The new phone will combine the two companies’ software in a device bearing a color screen larger than a cell phone but smaller than current Palm offerings. The partnership should produce additional products as well.

Faster Connections Coming

The devices are targeted at taking advantage of the new, high-speed digital wireless networks already common in Europe and now under development in the United States. The companies said the speed of the new network will eventually allow downloading of audio and video over wireless connections, something next to impossible given current connection speeds.

Palm CEO Carl Yankowski said the partnership will yield “smartphone products that offer seamless integration of wireless data and voice access.”

Mad Dash

The alliance puts Motorola and Palm in a mad dash with several other firms to develop the all-in-one product first. Nokia, Ericsson and Microsoft have all announced similar efforts.

Handheld device maker Handspring, which licenses the Palm operating system, said it will begin selling an attachment designed to turn a handheld organizer into a cell phone in the United States in November. VisorPhone, as the product is known, will enable users to plug an earpiece into their organizer and conduct phone calls through the device.

Wireless Internet devices are widely expected to become a staple of Web access in the future. The Yankee Group predicts that more than one billion Web-enabled mobile devices will be in use around the world by 2003 and that well over half of all online transactions will come from wireless connections.

So far, however, the wireless Web has been slow to catch on. Among the reasons often cited for the hesitancy are the difficulty of using a cell phone or other small devices to surf the Internet, and the fact that staying connected over the Web and by phone requires carrying more than one device.

Other Developments

Merle Gilmore, executive vice president at Motorola, said the two companies want to make it easier for consumers and businesses to stay connected at all times by “providing further consumer and business access to the vast global network of information and personal interaction.”

The two high-tech giants first linked up late last year, when Motorola bought a $65 million stake in Palm prior to that firm’s successful IPO in March.

Motorola also said Monday that it is ready to make available two cell phone products using the Bluetooth wireless technology being developed by a team of high-tech companies, including IBM.

The company said the Bluetooth-enabled products allow cell phones to become the hub of local wireless networks.