Hands Untied

Brandweek, May 22, 2000 by Todd Wasserman

It's hard to generate much sympathy for handheld computer maker Handspring. After all the Mountain View, Calif., firm had a lot of advantages over other startups hitting the market. As the only computer company aside from Palm to license the Palm Operating System for U.S. retail, Handspring did not have the usual worries about working up the masses about its flagship product, Visor. And, with Handspring's pedigree (it is run by the two Palm founders, Jeff Hawkins and Donna Dubinsky), the trade press was buzzing with rumors about the company months before any product appeared.

Those factors, however, turned out to be something of a mixed blessing. Expectations were sky high for the product, and the strong demand put pressure on the startup company to deliver a lot of units quickly--something it failed to do early on, tarnishing its image.

Headlines blaring "Palm Flop" may have hurt Handspring in the short run, but, according to Palm veteran Ed Colligan, Handspring's vp of sales and marketing, they were not a cause for concern. Colligan said the bad press was the result of a misunderstanding about the company's strategy Handspring, he explained, never intended to have a huge launch. Rather than jumping in to the market and facing product shortages and other potential glitches, the company spent six months trying to foster a development community. Since getting developer support while keeping a lid on details of the product would be impossible, Handspring soft launched Visor in September. Even then, some one leaked details to PC Week, torpedoing the company's planned announcement.

The developer strategy, of course, had been one of the key factors in Palm's success. The thousands of applications for the Palm OS, often distributed free, gave Palm an edge over Microsoft to the point where Palm now controls about 75% of the market. Handspring sought a similar differentiator with its Springboard technology a proprietary hardware design that lets users snap cassettes to the unit for wireless telephony, games and music applications. Currently Handspring has about 2,000 supporting applications.

The problem was, Handspring's strategy was often misunderstood by techies, who falsely saw Christmas 1999 as a make-or-break period for the company While Handspring watchers waited for a big marketing campaign to spark demand, the company was in what Colligan called "demand-suppression mode," with no advertising and Internet-only distribution.

"There was a real challenge in that," Colligan said. "To keep the product only on the Internet and restrain the channels. Even though we tried to constrain demand, it went way beyond [expectations]. We had too much interests."

An enviable position to be in, to be sure. Yet Handspring wasn't just riding on the post-Palm buzz. The Visor products started at $150, hitting a price point that even Palm's lowest-priced items hadn't before. Moreover, the Visor's multi-colored, translucent plastic design came out just before a slew of similarly designed computer and consumer electronics products, influenced by Apple's iMac, surfaced.

Early reports were that Handspring was going to chase the Generation Y market, but Colligan said that was never true; rather, Handspring hits a 25-50 demographic of mostly men. While Palm has made a point of showing women in its ads and using focus groups to make a device that would attract women, Colligan, Palm's ex-marketing director, said that 85% of Palm and Handspring's users are male.

Handspring may not have been targeting Gen Y but the company's logo, which features a modernistic rendering of a man doing a flip (internally, the logo is called "Flip"), projects a young image, said logo designer Gordon Mortensen, owner of Mortensen Design, Mountain View Calif. The logo is also separate from the type, a somewhat unusual approach that could give Flip an Apple-like brand identity in the years ahead.

In January, Handspring shifted gears, launching its first print campaign, a low-key affair via Butler, Shine & Stern, San Francisco. "Hi," read the inaugural ad, which featured an open-palmed bare hand and a minimum of copy explaining what the company was about. Other ads used the same motif to out line some Springboard features, like MP3 music (a hand with a lit lighter) and e-books (a hand in a V-shaped Vulcan salute for Star Trek books).

Limited distribution followed in March with placement at CompUSA, Best Buy and Staples, aided by end cap and POP displays from Beeline, Fremont, Calif. So far, Handspring seems to have put its distribution woes behind it, said Matt Sergeant, mobile computing analyst with ARS, LaJolla, Calif. "They've only been at retail for a month and half," he said, "but they do seem to have managed to sufficiently spread the machines throughout retail."

With the company's reputation intact after a restrained debut, free of any major glitches, Handspring is gearing up for the next phase. It is planning a more aggressive sophomore campaign via Leo Burnett, Chicago, it's new agency of record, as it faces a slew of competitors--including a possible Palm OS-based device from Sony and models based on Microsoft's Pocket PC. And unlike last Christmas, Colligan said, this one really will be a big deal.