John Sculley had a dream. It began in the late 1980s, when many Americans were first getting acquainted with desktop computers. But Sculley, chairman of Apple Computer, was already thinking smaller. He envisioned a world where everyone carried handheld computers designed not for the workhorse tasks of PCs-word processing and spreadsheets-but for organizing and managing your life. Instead of using keyboards, the new gizmos would recognize handwriting, a gee-whiz feature that made the machine sound like something out of Star Trek. What to call it? Sketching ideas on the back of a napkin one night, Sculley came up with a name that stuck: the personal digital assistant.
Skip ahead 15 years, and Sculley's vision is a reality. Today millions organize their lives on PDAs. In some corners of society, being without a Palm or a Visor is like scuba diving without a tank. There's just one problem: When it comes to PDAs, Apple is MIA.
Sculley's cheerleading for the handheld revolution culminated in the Newton, unveiled in 1993 with one of the decade's most visible high-tech product launches. But amid runaway expectations, the Newton quickly fell to earth. Its handwriting-recognition system was so illiterate that it became the butt of "Doonesbury" strips and late-night comedians.
The bad buzz nearly destroyed the entire handheld industry, killing off competing entries from AT&T's EO to Casio's Zoomer. Then, just a few years later, came the PalmPilot, a breakthrough PDA that became one of the fastest-selling consumer electronic products in history. Why the reversal? How did the Palm succeed where the Newton had failed? The answers lie in what is a cautionary tale about the importance of timing and the dangers of hype.
Let's start with the scene inside Apple as the '80s wound down. Sculley, the former PepsiCo executive who replaced Apple co-founder Steve Jobs, was on the lookout for new products to reduce Apple's dependence on the Macintosh, and he seized on pen-based computing as the next paradigm shift. He viewed the Newton as much more than a personal organizer. It would be a full-fledged software platform that would support myriad breakthrough applications. Most of the public interest focused on the handwriting-recognition feature. "If you're going to carry it around, it's something intimate, and it had to have a different interface," Sculley recalls. "We thought a rule-based system [using software that could recognize your handwriting] would enable you to do things more simply, without typing in long commands or using a pointing device."
In 1992, Apple's techies had only rough prototypes for the new machine when Sculley touted its potential at an industry conference. Other companies were working on handhelds, but anticipation focused on the Newton's launch. "Newton got more than its share of attention because of the Apple hype machine," says Jerry Kaplan, a veteran entrepreneur who was then running Go Corp., a start-up working to build a PDA. "Apple was very effective at [getting PR for] whatever concept du jour John Sculley wished to promote."
But Sculley should have been careful. Amid the hype, the Newton team faced pressure to introduce a product that was still shaky. "This vision got bigger and bigger. 'It's going to change the way everybody works!'" says Ken Wirt, then the Newton's marketing vice president. In fact, it was barely functional. "I remember the night before it shipped," Wirt says. "We were sitting on the floor patching the operating system."
When the Newton hit shelves, early-adopters ate it up. But as the rest of the public heard about its faulty handwriting-recognition system, sales slowed. Although the handwriting snafu garnered the most attention, in retrospect observers see other problems with Apple's approach. At $699, the Newton was too pricey for the mainstream. Its design was too bulky. It was difficult to connect to a desktop machine. "Apple overpromised and underdelivered," says Tim Bajarin, president of Creative Strategies, a tech consulting firm. Even Sculley admits to the project's failings. "Newton was too ambitious technically, it was probably too open-ended, and it didn't try to anticipate what its application would be," he says. Apple's critics call it one of the biggest missed opportunities in the industry's history. "It was an astronomical miscalculation," says Bajarin. "This went on to become a multibillion-dollar market, and Apple had a chance to be the leader."
The Newton's implosion killed off most of the other nascent handheld companies-except for Palm. The company, co-founded by Jeff Hawkins, a techie who'd begun tinkering with pen-based computing in the '80s, had already achieved a breakthrough. While the Newton tried to use computing horsepower to recognize the quirks of a user's handwriting, Hawkins devised a program called Graffiti, in which users draw letters in a regimented way that allows the device to reliably decipher them. By the mid-'90s Hawkins had turned his attention to hardware, and he began showing off a model he'd carved out of wood. It was an odd ploy in an industry focused on silicon, but it demonstrated Hawkins's belief that handhelds' success would depend on their having a pleasing form and design.
When the original PalmPilot launched in 1996, its small size was only one of the things that set it apart from the Newton. Instead of being the basis for a huge, expandable platform of the kind Sculley imagined, the Palm was a simple device that did a few tasks-primarily storing address and phone data, a calendar, and a to-do list-and did them well. Other key advantages: a lower price ($499), and an ingeniously simple method for exchanging and backing up data with a desktop PC, via a HotSync cradle.
Palm may also have gotten lucky. While some observers insist that the Palm caught fire simply because it was better designed than the Newton, others see larger issues that helped it win acceptance. "Timing is very, very critical to the success of these ideas," says Kaplan. He believes the world was ready to accept PDAs by the mid-'90s because cell phones, the Internet, and corporate networks were increasing people's appetite for a connected device. Even if the Newton had been better executed, he says, "it was too early from technology, infrastructure, and customer acceptance standpoints."
Palm enjoyed another advantage: Because the Newton debacle put most other handheld ventures out of business, Palm was virtually the only game in town. "We had a three-year head start we wouldn't have had if the rest of the industry hadn't crashed and burned," says Wirt, the former Apple exec who's now the senior VP of marketing for Palm. While others tried to revive their handheld teams (some of whose players had migrated to Palm), Palm added features and expanded the line. The PalmPilot begat the Palm III, a more industrial-looking unit. The Palm V was a sparer design. Palm VII, launched at the peak of the Internet hype, offered wireless Internet access, a key selling point for early-adopters. By then, the Palm was nearing ubiquity.
Now Palm is learning that competitors have a way of catching up. While Palm's product line expansions focused on redesigned hardware, its basic operating system hasn't changed much, leaving it vulnerable to innovators. The competition also intensified when Hawkins and fellow co-founder Donna Dubinsky left Palm after a fallout with corporate parent 3Com and started Handspring, which produces a rival PDA. Today Palm still dominates the market, with nearly 50 percent of handheld sales. But it's steadily ceding market share to Handspring's Visor and other competitors. The biggest challenge, experts say, is from Microsoft, which has at last reintroduced its own handheld. The updated Pocket PC does a better job than the Palm of incorporating access to business software like databases and corporate intranets. "Palm has lost a five-year lead, which is pretty incredible," says Ken Dulaney, VP of mobile computing at Gartner, Inc., a technology consulting firm. "Now it's a neck-and-neck race."
Palm paints a rosier picture of its competitive stance: "Palm is in an incredible position for a company that's been in business for a relatively small period of time," says Wirt. "Palm created this multibillion-dollar market, and when you have a market like that you're going to draw competition." As for Sculley, he doesn't sound regretful when he talks about the Newton. "If you're going to push the edge of the envelope with innovation, there's a very thin line between success and failure," he says. "The mistake we made with the Newton is we should have kept it much lower-profile while we were trying to work through some of the issues and getting the technology better-honed." And while he says nice things about the Palm, don't expect to find one in his briefcase. "I use a BlackBerry," he says.
