Piloting Palm: The Inside Story of Palm, Handspring, and the Birth of the Billion-Dollar Handheld Industry

Piloting Palm: The Inside Story of Palm, Handspring, and the Birth of the Billion-Dollar Handheld Industry

by Andrea Butter, David Pogue

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piloting palm

"This really is the inside story of a groundbreaking project. The Palm device and its offspring have millions of adherents, and all would enjoy this impeccably told— and sometimes harrowing— origintale."

—Steven Levy, author, Hacker

Chief Technology Writer, Newsweek

The most stunningly successful new product launch of the


piloting palm

"This really is the inside story of a groundbreaking project. The Palm device and its offspring have millions of adherents, and all would enjoy this impeccably told— and sometimes harrowing— origintale."

—Steven Levy, author, Hacker

Chief Technology Writer, Newsweek

The most stunningly successful new product launch of the information age . . . the creation of a billion-dollar industry virtually overnight . . . an intense, behind-the-scenes struggle for control of a powerful young company . . . these are just a few highlights from the incredible story of Palm Computing, its visionary founders, their creation of the rival Handspring, and a volatile new industry whose future is still up for grabs.

In Piloting Palm, Palm Computing insider Andrea Butter and New York Times columnist David Pogue reveal how the company's visionary founder Jeff Hawkins and former CEO Donna Dubinsky created the most successful start-up in computing history and revolutionized the way the world does business.

Piloting Palm re-creates the company's product development phase, its desperate attempts to raise capital, and the dizzying final weeks before the PalmPilot launch. The only book written with the full cooperation of Hawkins, Dubinsky, and scores of Palm and Handspring executives, it also reveals the strategies behind the PalmPilot's success in the marketplace and relives Palm's intense battles with Microsoft.

The authors recount how, after winning big in the marketplace, Hawkins and Dubinsky lost the battle of the boardroom, failing in their attempts to resist assimilation by corporate behemoth 3Com. They examine their painful decision to leave Palm and unveil the secrets behind the success of their new venture, Handspring, which quickly lapped up a good portion of the handheld market. The authors go behind the scenes to reveal how tactical mistakes, a softening economy, and the threat from Microsoft pit Palm and Handspring against each other in a fight for their very survival.

This unforgettable true story combines the inspirational power of the ultimate business success story with the twists and turns of a classic drama. From behind-the-scenes glimpses of corporate powerbrokers in action to compelling portraits of the idealistic people behind the most successful start-up in computing history, Piloting Palm tells an authentic tale of vision, venture capital, and the indomitable entrepreneurial spirit.

Editorial Reviews

Now standard gear for many executives, Palm devices are the result of one of the most successful consumer-oriented product launches ever. In this fast-paced and well-written book, Andrea Butter, a former marketing executive at Palm, and David Pogue, a highly respected computer science author, narrate the history of the handheld device from its birth in Silicon Valley to its present-day status as one of the essentials of life. The Palm story makes for a compelling look at how business operates; one of the virtues of the book is that the authors place you inside meetings and strategy discussions as the creation of the device -- a signal event in the mobile technology revolution -- is occurring.
Publishers Weekly
The swift Internet-like alterations in Palm's corporate structure make the company an excellent case study of the late 1990s technology-driven boom and bust. True, Palm was not precisely a dot-com stock, but who can argue that the consumer impulse to drop $500 on a spruced-up date book was anything but high-tech froth? Palm was founded in 1992 with hard-won seed money, just a few years before venture capital rolled across Silicon Valley like a tsunami. It began as the junior partner in an unsuccessful consortium effort to compete with Apple Computer's Newton, the breakthrough handheld device. This failed strategy inspired the software executives to build their own hardware without relying on strategic partnerships, until financing troubles forced them to sell out to a larger firm, modem-maker U.S. Robotics. When USR was acquired by 3Com, Palm became the junior partner in a megamerger. Eventually, Palm was spun out in an IPO during the heady days of early 2000, and employees drooled as the stock price spiked to $165 on the first day of trading. (Today Palm shares trade between $2 and $4.) The authors give detailed portraits of both high-tech product launches and investment banking negotiations without once getting bogged down in the jargon of either world. No doubt readers can thank coauthor Pogue, a New York Times columnist, for the smooth, lucid prose. Former Palm marketing v-p Butter is an unabashed fan of the company's founders technologist Jeff Hawkins, CEO Donna Dubinsky and marketing director Ed Colligan and she makes a compelling case that these three launched the handheld computer industry. (Mar.) Forecast: This title will easily fit into the B-school curriculum on corporate finance or marketing, since it offers insights into both. Hardcore techies should enjoy it, too, because it's filled with colorful portrayals of leading industry figures. Copyright 2001 Cahners Business Information.
Library Journal
Since Americans love gadgets, they should be interested in this book, which chronicles how Jeff Hawkins had an inspiration that led to the handheld industry, the greatest gadget creator of them all. Former Palm Computing executive Butter and New York Times technology consultant Pogue recount how Hawkins and a few others started Palm Computing, surviving crisis after crisis until it was eventually sold to another company and ultimately spun off in an IPO but not before Hawkins and several of his followers had left to start another handheld company called Handspring. Along the way, we learn that Silicon Valley start-ups are at the mercy of venture capitalists, that the launching of new products is fraught with peril, and that small-tech companies can occasionally compete successfully with larger companies (e.g., Microsoft). But, more tellingly, the authors calculate the human cost of sacrificing one's life in order to realize a dream. There's plenty of drama here, and, given the expertise of the authors, one would have expected a gripping read rather than simply a connecting of the dots. Not so, unfortunately; the book suffers from workmanlike writing. Handheld organizers are here to stay, but their real story remains to be told. For larger business collections only. Richard Drezen, Washington Post News Research, New York Copyright 2002 Cahners Business Information.

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Chapter 1

In the Valley of Dreams

By 1998, Jeff Hawkins would be called the "father of handheld computing." But in 1991, he had no intentions of launching an entire industry, or even founding a company. He only set out to create a new kind of computer.

In Silicon Valley, where Hawkins lived, this attitude was bordering on eccentric. Over four decades of technology booms and occasional busts, the Valley had consistently spawned a petri dish of ideas from which new start-up high-tech companies were created. Since the arrival of venture capitalists (VCs) in the 1960s, a techie with a good idea didn't even have to risk his life's savings on his dream. Instead, he'd find a VC to fund his scheme, then he'd quit his job and voilà: A start-up was born.

Driving from his home in Redwood City, Jeff Hawkins passed the office towers of Silicon Valley legends. To the south, there was Intel, the computer chip company that was on the verge of becoming a household name with its new "Intel Inside" campaign. To the north, Oracle, which Larry Ellison had founded in 1977 with a mere $2,000, had turned into a software juggernaut with $1 billion in annual sales. On the west side of the Valley, Apple Computer's sprawling campus alongside Highway 280 teemed with the enthusiasm of a company that hadn't yet lost its mortal struggle with Microsoft.

Everywhere in between, the nondescript offices of unknown start-ups dotted the roads that crisscross the high-tech Mecca between San Francisco and San Jose. Only 1 in every 10 new companies would survive, but that didn't keep hundreds of entrepreneurs each year from striking out on theirown.

For Hawkins, it wasn't the business odds that kept him at his job as a high-tech executive. It was the personal toll life as an entrepreneur might take.

"I'm not a start-up kind of guy," he says. "I don't like to work super-long hours. I knew that a lot of people who had started companies had failed marriages. Just observation said: This is a very stressful thing to do."

Nevertheless, in the late spring of 1991, Hawkins, like so many entrepreneurs before him, was in the grip of an idea for a new type of a computer. He couldn't get the concept out of his head.

At 34, Hawkins worked at GRiD Systems, a small computer company on the east side of the San Francisco Bay. It was his second stint there; he'd left his first GRiD job in 1986 in order to attend grad school. When he left UC Berkeley, GRiD was happy to welcome him back, this time as vice president of research.

It was a job that was tailor-made to his interests, which included managing the development of new products, not people. Without employees of his own, he didn't have to deal with the drudgery of the day-to-day administrative tasks common to VPs with large staffs (or to CEOs of start-ups).

One of the first ideas he presented to GRiD's management upon his return to the company was a new type of computer based on a concept called pen computing. Pen computing meant that you could write, using an inkless pen (stylus), directly on the computer screen.

It wasn't a new idea by any means. Very likely the first pair to think of the idea was Jerry Kaplan, a technology executive, and Mitch Kapor, the founder of Lotus Development. In a cross-country February 1987 flight in Kapor's private plane, they hit on the notion of a computer that could be used like a paper notepad. Using a pen rather than a keyboard, they thought, would be attractive to people who aren't conveniently seated at a desk every time they need to use a computer, such as delivery drivers, claims adjusters, or sales reps in the field.

Kaplan, an inspired salesman, pitched the idea to John Doerr, a partner at the elite venture capital firm Kleiner Perkins Caulfield and Byers. Doerr convinced his partners to invest in the idea, and Kaplan promptly got $1.5 million in start-up money for a new pen computing company called GO.

Pen computers seemed tailor-made for GRiD, though. Not only did the company pride itself in being a technology leader, but it had experience in designing portable machines, and its customers already included companies who most needed portable, tablet-style machines.

One of the keys to making a pen-based computer was, of course, handwriting recognition technology, which GRiD lacked—until now. Jeff's studies at Berkeley had provided an important asset to both him and his employer. He was the proud owner of a patent on an invention that stemmed, in part, from his brain studies. By taking the approach that a computer could mimic the brain's pattern recognition, he had written software that could recognize hand-printed characters.

GRiD's management green-lighted the project and agreed to license Hawkins's handwriting recognition software, later to be called PalmPrint, for use in the new machine. Jeff would oversee the creation of a tablet computer called the GRiDPad.

The GRiDPad was ready for prime time in 1989—and, in the specialized markets for which it was designed, it was a hit, even at 4.5 pounds and $2,500. To control costs and streamline the development time, Hawkins had bucked the high-tech trend of relying on expensive and unproven custom-designed parts and instead built the device from off-the-shelf components.

GRiDPad's success gave him the confidence to express his views even when they differed from the industry's conventional wisdom—which they often did. Among GRiD's executives and technical staff, he had gained a reputation as a self-assured and brilliant product designer, which allowed him the luxury of plucking GRiD's best engineers to work on his projects. Most of the other GRiD executives respected him, though some considered him stubborn, the kind of guy who was likely to say, about one engineering issue or another, "I don't care what you say; I know I'm right." Even those put off by his self-confidence, however, had to admit that his intuitions generally were right.

By early 1991, the pen-based computing wave was the Next Big Thing. John Doerr's 1987 investment in GO had triggered a high-tech gold rush by other investors, who poured nearly $100 million into pen computing start-ups. The press added to the buzz with breathless articles about the high-profile start-ups, including GO and a free-spending company called Momenta. IBM, Toshiba, Canon, and NCR had each announced plans to bring pen computers to market.

Where there's hardware, there's software, and a half-dozen small companies had sprung up to write programs running on the new computers. In March, Microsoft got into the game by announcing an operating system it called Microsoft Windows for Pen Computing.

Yet, despite all of this pen computing frenzy, only a single pen computer was commercially available: Jeff's GRiD machines. Despite the spending and the flashy press events, no other models had even reached the market.

* * *

The success of his product designs gave Hawkins a modest amount of fame as a pioneer of the fledgling pen computer industry. GRiD often asked him to meet with potential customers, journalists called him for his observations on new pen technologies, and he became a staple speaker at computer industry conferences.

But even as his public star was rising, privately, Jeff had begun to change his mind about the whole affair. He considered pen computers—even his own GRiDPad—too big, heavy, and expensive for everyday people to contemplate carrying around. Niche-market workers such as claims adjusters or meter readers may have found them useful, but these machines would never gain mass acceptance.

What the world really needed, he thought, was a pen computer for consumers. He asked his GRiDPad customers at every opportunity: Would they use a similar computer for their personal use? The answer was always the same: only if it were a lot smaller and less expensive—under $1,000.

The more he thought about it, the more obvious it seemed. Millions and millions of consumers would buy a small, inexpensive computer.

Hawkins presented the idea to his employer, but knew that GRiD would have no interest in the concept; GRiD was firmly focused on the corporate market, and couldn't afford to divert its resources to a consumer business. His consumer product would never see the light of day unless he struck out on his own.

He hoped to interest Tandy, GRiD's corporate parent for the last three years, in his idea. After all, Tandy had long been one of the giants in American consumer electronics sales. As the corporate owner of Radio Shack, Tandy operated nearly 7,000 consumer electronics stores; more than 90 percent of Americans lived or worked within five minutes of a Radio Shack store. If Hawkins could get Tandy to market his product, Radio Shack would inevitably sell it to the stores' millions of consumers.

Jeff contacted Howard Elias, the executive responsible for Tandy's advanced technology businesses. The two had gotten to know each other during Elias's visits with GRiD's management. By a stroke of luck for Jeff, Elias was also directly responsible for Radio Shack's computer business.

Tandy was always looking for new and unique products to put through its vast network of retail stores; Elias, cautiously interested, invited Jeff to a small brainstorming meeting. In that meeting, the project took further shape. The machine that Jeff had in mind would be small and come with built-in software to make it useful immediately.

Soon after, Elias called again. He wanted Hawkins to meet a wider circle of Tandy execs at Tandy's headquarters. "Fly out here to Fort Worth tomorrow," he said. "And get me a brief of the project before we meet."

Jeff had to work quickly. He wrote up a three-page overview about the project, which began like this:

Palmtop computing devices will be as ubiquitous as calculators by the end of this decade. . . . To get an idea of the market size for these computers, consider the possibility that most high school students, nearly all college students, and most professionals will own one. With prices starting at $200 (1995), it is entirely conceivable, and I believe likely, that 50% of those people will own or use a portable handheld computer at sometime in their life.

Jeff searched for a code name for the project. He wracked his brain. "Consumer, consumer, consumer—zoomer! Why not?" He typed Project Zoomer at the top of the document and sent it off to Texas, never dreaming that his arbitrary code name would remain attached to the project all the way through its development—and even on the finished product.

Hawkins's Zoomer project captivated the imagination of the Tandy managers—maybe too much. After a series of meetings, Tandy proposed to create a new subsidiary, led by Hawkins himself, to develop the product, with Jeff as its key employee.

This wasn't the kind of involvement he had imagined. The more Hawkins thought of it, the more it seemed impossible to build a great product within the confines of Tandy or a Tandy subsidiary. To pull off the Zoomer project, he knew that he'd need the very best engineers; but for Silicon Valley's best and brightest, a vast Texan company like Tandy scarcely seemed like a cutting-edge innovator. With the arrogance of elite programmers who work on leading-edge technology, GRiD's engineers, for example, considered Tandy a dowdy operation that trafficked in boring technology, even if it was GRiD's parent company. Furthermore, building the Zoomer as a Tandy subsidiary would mean that his decisions would always be beholden to corporate needs rather than those of the Zoomer business.

Fortunately, there were other options, particularly for a successful techie with a great idea. In Silicon Valley, men (and a very few women) with money were waiting for techies just like Jeff Hawkins.

From its modest beginnings in the early 1960s, the venture capital industry had blossomed into one that comprised several hundred firms. In just the first half of the 1990s—and even before the dot-com boom—the VCs of Silicon Valley had invested $2 billion in a wide range of start-ups. (In 2000, the final year of the Internet bonanza, over 1,000 venture capital firms spent $87.5 billion on more than 4,000 start-up companies.)

Most of the venture capital firms that cluster in Palo Alto and Menlo Park, near Stanford University, are small partnerships of four or five partners, many of whom had been successful entrepreneurs or business executives in previous careers. The partners raise what one VC calls OPM (for other people's money), and invest the resulting fund in start-up companies, in exchange for shares of the new company.

The venture capital business could be extremely profitable; in 1991, venture capital firms averaged a return of 20 percent on their investors' money. (Later, during the dot-com boom, that number seemed laughably small. Elite firms like Kleiner Perkins, heavily invested in Internet companies, returned more than 70 percent in some years. When the boom turned to bust in 2000, investment profits declined accordingly.)

Successful VCs were bombarded with business plans and presentations daily, and had to separate the wheat from the chaff. In the space of a few hours, they had to make a decision that could make or cost the firm millions of dollars. If a start-up's leadership lacked the right business skills, even a good business idea could lose its value very quickly. That's why VCs are fond of saying that they like to meet good people even more than good ideas. "If it's a good person, the ideas will take care of themselves," they say.

* * *

In October of 1991, Hawkins had tagged along with a buddy who wanted to pitch an idea for a company to Sutter Hill Ventures, one of Silicon Valley's oldest venture capital firms. Jeff was there to act as an expert witness, a technical expert who could explain and vouch for the industrial-strength pen-based computer being pitched.

It was Jeff, however, who stole the show. An introvert by nature, Jeff didn't have the natural charisma of Apple founder Steve Jobs, or the all-powerful arrogance of Oracle's Larry Ellison. What he did have was a dispassionately logical mind and a fervent conviction that his technology vision was right.

When the venture capital partners asked Hawkins's opinion of the market for these machines, he described what he thought the future of computing looked like and painted a picture full of handheld computers. "It's inevitable that all computing will be mobile," Jeff told them. "There are so many colliding things that say, 'small, cheap, robust, on-your-person is better than big, slow, clunky, on-your-desk.'" The VCs liked his "technical abilities coupled with a natural effervescent personality," as one senior partner put it—so much so that, instead of investing in the friend's idea, they asked Hawkins to stick around after the meeting. They had detected his ability to project himself and sell an idea, key attributes of the "good people" VCs look for. Would he care to come back again, they asked, and expand on his notions on the future of computing?

* * *

As any budding entrepreneur looking for funding quickly learns, Silicon Valley venture capital offices aren't generally opulent or grand.

At Sutter Hill's headquarters there are no thick, soft carpets or oversized mahogany desks to put a visitor on notice. What makes the entrepreneurs nervous is the knowledge that their meeting will be their one and only shot to get heard by Sutter Hill. They will either pique the partners' interest or be back out on the street, peddling their business plans to any investor whose name they can dig up.

Jeff Hawkins wasn't nervous, and he didn't carry a presentation crammed full with charts and financial predictions. The way he saw it, he was there to tell the VCs about his ideas for mobile computing. Starting a company with venture capital money was just one of his options, and not his favorite one at that. "I was acting like a happy-go-lucky kid, totally uninterested, probably because I was uninterested," he says.

Once in the VC's conference room, Jeff discussed his brain studies as much as the Zoomer project. Clearly, the partners were more interested in Zoomer, so Jeff did his best to paint a picture of the product. It would be roughly the size of a paper-back book and weigh about a pound. It would have all the functions of the popular paper-based organizers (i.e., an address book, a date book, a note pad, and a to-do list), but it could also include functions that paper-based organizers couldn't easily provide—travel information, a thesaurus, a language translator—the possibilities seemed endless. And, of course, it would use a pen, not a keyboard, as the primary means of data entry and interaction.

Like any computer, the Zoomer would consist of three different components: (1) the hardware, (2) the OS—the software that acted as the intermediary between the computer circuitry and the individual programs—and (3) the software programs that made the machine useful (e.g., the address book, date book, etc.). The VCs advised Jeff that his new company should avoid having to manufacture hardware—a difficult and expensive undertaking. Instead, they recommended that he join forces with a corporate partner already experienced in electronics manufacturing. Tandy, if it wanted to sell the Zoomer to its Radio Shack customers, might be able to assume that role.

As for the OS, Hawkins had already found one called GEOS from a company called GeoWorks. GEOS was perfect for the Zoomer project because, unlike the other operating systems on the market, it could run on inexpensive hardware. That left the task of writing the software programs for the little machine. The VCs immediately saw that the software posed an interesting business idea. In the desktop PC world, the real money was made in software, not in selling computer hardware. Surely, the same would be true for the avalanche of handheld computers that Hawkins expected to arrive. A start-up that made software for these machines would be a good investment.

At this second meeting, the partners were again impressed by the boyish technologist. Jeff struck them as both technically experienced and persuasive—a combination that's hard to find, but key to the success of a new company. After all, the founder of a start-up has to be able to recruit capable people, persuade the press to cover his or her products, and coax much larger companies to cooperate. In short, entrepreneurs must constantly sell themselves and their ideas. Jeff did it without even trying.

Just a few days later, yet another VC contacted Jeff: Bruce Dunlevie, a partner at Merrill, Pickard, Anderson & Eyre. At 35, only a year older than Hawkins, Dunlevie had already had a stellar career in the computer industry. He had founded the PC division at Everex, and nurtured it into a multi-hundred-million-dollar business unit in just four years. As a board member of GeoWorks, Dunlevie called Jeff Hawkins for an opinion of GEOS, the very OS that Hawkins was considering for use in the Zoomer.

Jeff agreed to meet Dunlevie at the Merrill Pickard offices. Dunlevie had been a VC for a little over two years, and had not yet had any "home runs," as he called deals that result in big pay-outs. Dunlevie, a former high school quarterback, still peppered his speech with sports metaphors. Jeff, who has never followed sports, had no idea what expressions like "swinging for the fences" might signify, but Dunlevie's unassuming demeanor immediately appealed to him.

At the end of the meeting, Dunlevie steered the conversation to Jeff's plans at GRiD.

"Well, actually, I might leave GRiD and start a company," Hawkins told him.

"Really? To do what?"

Jeff started his pitch about the small, handheld computer that he envisioned, and the millions of consumers who would buy it. He talked about his affiliation with Tandy, explaining that America's largest consumer electronics retailer was going to build and sell his computer. "This is going to be huge, there's no doubt about it," he finished.

As a member of GeoWorks' board of directors, Dunlevie was already convinced that handheld computers would be an interesting investment opportunity. Betting on a smart guy like Hawkins had paid off for VCs handsomely for decades.

An hour later, Jeff walked out of one of the Valley's leading venture capital firms with growing confidence that he'd have funding for his idea.

It was mid-November. Encouraged by the VCs, Jeff knew now for certain that he wanted to start a new company. If he could get the funding squared away in time, he might be able to start the new year as an independent entrepreneur.

Upon his return to GRiD, he told his bosses that he'd decided to leave; he'd stick around until the end of December, and then set up his new shop on January 2. His next step had to be to tell Tandy—gingerly, so as not to alienate Tandy's management—that he'd be setting up his own shop.

That's when his luck turned.

* * *

John Roach, Tandy's CEO, was very keen on Jeff's Zoomer. Howard Elias, who worked directly for Roach, had briefed him regularly on the project's progress. No wonder, then, that Roach was not pleased when he heard that Jeff was determined to set off on his own. He summoned Hawkins to Fort Worth.

Tandy's headquarters occupied twin towers in Fort Worth, 20 stories high. Going to Roach's office, on the top floor of the tower called Tandy One, was "like visiting the Wizard of Oz," Hawkins says. After a wait in a fifth-floor conference room, he was summoned to the reception desk on the 19th floor. From there, he took a ride up the one-way escalator to the 20th floor, where he was greeted by one of Roach's secretaries. The top floor was two stories high, lined with floor-to-ceiling windows. Now he was escorted around a corner, down a majestic corridor with walls of wood and granite. Light streamed in from the end of the corridor where it opened into Roach's office.

John Roach peered at Hawkins from behind his desk, the breathtaking view of the Dallas-Fort Worth skyline behind him.

"You should really do this project at Tandy. You can't pull something like that off on your own," Roach said in his Texas drawl.

"I need a bunch of really smart people on this," Hawkins told Roach, as delicately as he could. "I can't pull this off as part of Tandy. I won't have the flexibility and independence that I need to attract good people."

But Roach, who wanted his company to be a technology powerhouse, considered Jeff's machine the kind of flagship product that could draw attention to Tandy as a company on the leading edge of consumer technology. He laid out how Tandy would finance Jeff's project, how this would further Jeff's career, and how much Jeff stood to profit.

Hawkins agreed that staying at Tandy might be the easiest path, but maintained that the resulting product would suffer. The best and brightest engineers in the Valley wanted to work for a cool start-up, not Radio Shack.

When Jeff explained that he had already lined up serious interest from VCs, Roach reacted strongly. "You don't know what you're getting involved with," Jeff remembers Roach saying. "Those venture capitalists, they're going to squash you like a gnat!" Roach rubbed out an imaginary bug on his desk with his thumb.

Roach ended the meeting on a positive note, saying, "Let's see if we can find a different way that gets us both what we think we want." Still, Hawkins worried that the VCs would withdraw their support if Tandy might not be on board. At the Dallas airport, Jeff called Bruce Dunlevie and the Sutter Hill partners. "I think Tandy is going to work with me, but I can't guarantee it," he told his prospective investors. On the plane ride home, Jeff started to think about concessions he could make to Tandy to keep the corporation on board.

Then, on December 9, during the Monday morning executive staff meeting, GRiD's president, Bruce Walter, turned to Jeff. He said that he'd been thinking about Jeff's departure over the weekend. Now that Hawkins was planning to develop his palmtop independently, rather than within the Tandy/GRiD family, Walter couldn't let Hawkins have PalmPrint.

This was a snag of show-stopping proportions. Technically, Jeff owned the recognition software and had simply licensed it to GRiD. Over the years, however, GRiD engineers had made many improvements to the software. Jeff didn't want to do without these enhancements—but now they belonged to GRiD. Having to re-create the improvements that had been made to his software would set the Zoomer project back by a year and cost hundreds of thousands of dollars.

Jeff broke into an impassioned plea in front of the assembled executives. "You have to hear this!" he said. "I've been talking about this for months now. I've said this a thousand times: I have no interest in competing with GRiD!"

Walter held firm. Jeff would not get the rights to use the improved recognition software.

Jeff went home that night, dejected. He had the vision, the concept, and was close to getting the financial backing—but now all his plans might fall apart.

The whole project appeared to be a Gordian knot. The VCs wanted Tandy involved, yet Tandy's John Roach didn't want Hawkins working with VCs; meanwhile, GRiD's Bruce Walter was refusing to give Hawkins the rights to a key technology. Without Tandy and PalmPrint, the VCs might not fund him. Worst of all, in Jeff's mind, was the fact that other people were counting on him; GeoWorks was expecting to work on the Zoomer, and Jeff had even lined up his first two employees. It was, as Hawkins says now, "the hardest month of my life."

Determined not to be stymied by the licensing issue, Jeff holed up in his office and immersed himself in the paperwork that governed the PalmPrint license. Deep in the contract, he found a key phrase: He had licensed his technology exclusively to GRiD, to run exclusively on GRiD products.

But that clause was long forgotten, In the months since, Hawkins had persuaded GRiD that it could get extra revenue and expand its market penetration by licensing its software—which operated the successful GRiDPad computers—to other computer hardware companies. The catch was that the licensed software included PalmPrint. Technically, Jeff had agreed to license PalmPrint only to GRiD.

Jeff had found the leverage he needed. GRiD was stuck. Unless he rewrote the contract, the company couldn't proceed with the licensing deals already in progress.

So Hawkins proposed a "horse trade," as he called it. He would permit GRiD to license PalmPrint, if GRiD would permit him to use the enhancements it had made to his technology. GRiD had no choice. They agreed to the trade of rights.

The only brush fire left to put out was getting Tandy back on board. Hawkins had concluded that Roach cared most about having first dibs on the Zoomer; keeping Jeff at Tandy was only a secondary goal. After discussing the dilemma with the two VCs, Jeff arrived at a plan: If they offered Tandy the chance to be an investor in the start-up, Roach might feel assured of his company's insider status.

John Roach agreed, investing $300,000 in the venture. With the half-million each VC had invested, Jeff now had $1.3 million with which to launch his new enterprise. On paper, his company was already worth $3 million. That was the good news. The bad news was that in return, Jeff had given up 40 percent of his new company.

All he needed was a name for his new venture. Over the Christmas holiday, Jeff spent days thinking of company names, brainstorming with his wife, friends, and two prospective employees. A name related to the hand was logical.

One of the engineers suggested Palm Software because Jeff's master plan was to write software for the Zoomer market.

Jeff, however, didn't necessarily want to stick to software for the rest of his life; he had a hunch that he should keep his options open.

"Let's just call it Palm Computing," he decided.

Meet the Author

ANDREA BUTTER worked as director of marketing at Palm Computing beginning in 1993. She managed every product launch, including the revolutionary Pilot Organizer in 1996, and became the company's vice president of marketing in 1998. Currently a marketing strategy consultant, she lives in Menlo Park, California.

DAVID POGUE is the personal technology columnist for the New York Times. He is also the author of twenty computerbooks, including the bestselling PalmPilot: The Ultimate Guide. He has spoken at events such as Comdex, PC Expo, and Macworld Expo.

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