Your deal with PalmSource is a $40m-a-year commitment to run to 2006. Is there any commitment beyond that?
Not at this stage. I expect to continue to work with PalmSource into the future. But there's no commitment at this stage.
Assuming royalties of $10 per unit, that means you need to sell four million PalmOne devices to fulfil that commitment.
It's really not an important number. At the end of the day, we make business decisions based on where we think we can grow the business and not look at sunk costs. Those are sunk costs. It's a relevant data point, but it's not one that you'll change your fundamental business decisions around. We're committed to that $40 million and whatever per-unit price that is, that's what it is. We have that as a relationship and a commitment. We'll have to deal with that. If we want to move to another platform, we'll only do it because we believe there's a big opportunity to do it, beyond whatever differential that commitment is.
What's happening in China?
What's happening in China is us continuing to sell our handheld products more than anything. We do not have significant relationships with a carrier at this stage to sell the smartphones. And we do not have a native Chinese OS support there, so you end up being dependent on overlays, which is fine, it's a reasonable user experience, but it's not optimum.
In addition to that, we did an enormous amount of application development on top of the Palm OS for the Treo to do all the telephony and SMS functionality, and that has not been localized at this point. We don't have as effective a product as we could have in China. We absolutely have our sights on that. We would absolutely love to make that a bigger opportunity for us. Right now, we continue to sell the handhelds there. We recently launched the T5 there.
There was a report not too long ago claiming that PalmOne had quit China.
Another one of those. Rumours.
How about the one that says ECS (China) and Digital China have stopped distributing Palm products, leaving Worldlink as the only distributor in China? Digital China is the largest distributor over there.
So what? They're not necessarily right for you. One of the things you find when you're trying to enter markets is that it's much more important to have a very focused, dedicated distributor relationship because they help you make the market by marketing effectively. And if they have a lot of competition, which drives down price, they don't have the margin differential to enable them to reinvest on your behalf in the market.
I think it's very smart to consolidate the number of partners, to make sure we have one that we think is excited about our business, and is going to help us build it as effectively as possible.
The only reason to add people over time is to increase your share over time. But when you have a 4 percent share, you have a lot of room to run with a dedicated player.
