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Rivals Palm, RIM team up on e-mail

Palm and Research In Motion have announced a deal to offer BlackBerry wireless e-mail service over the Treo 650 smart phone.
A Treo 650 running BlackBerry software.
A Treo 650 running BlackBerry software.Palm
/ Source: Reuters

Palm Inc. and Research In Motion Ltd. have set aside their fierce rivalry with a deal to offer RIM’s BlackBerry wireless e-mail service over Palm’s Treo 650 smartphone, the two firms said Monday.

Palm and RIM, whose BlackBerry handset competes with the Treo, said they expect U.S. and international phone companies to begin offering the combined product starting in early 2006.

The deal is being done through RIM’s BlackBerry Connect licensing program, which is designed to expand its subscriber base while turning potential competitors into allies.

Almost all of RIM’s current subscribers now access its e-mail service through RIM’s own thumb-operated BlackBerry, which helped popularize wireless e-mailing when it was launched in 1999.

The financial terms of the deal were not disclosed, but the shares of both firms moved higher.

ThinkEquity Partners Pablo Perez-Fernandez, who rates Palm ”buy” with a $50 price target and RIM a “sell” with a $60 target, said he believed the deal would be positive for Palm and negative for RIM.

“BlackBerry represents a large addressable market for Palm. Conversely, BlackBerry Connect on the Treo is bad for RIM because we believe it will lead to a decrease in RIM’s handset sales,” he said in a note to clients.

Waterloo, Ontario-based RIM had about 3.65 million subscribers at the end of its most recent quarter.

Canaccord Capital analyst Peter Misek said the deal was positive for RIM because it would boost the Connect program. He said Connect had been slow to take off, likely because of RIM’s legal battle with patent holding company NTP.

Closely held NTP successfully sued RIM for patent infringement and won an injunction, stayed pending appeal, to shut down the BlackBerry service in the United States.

Misek said the Palm deal and the launch of Connect in North America on some Nokia devices validates “the Connect business and could provide sufficient critical mass for remaining handset vendors to license from RIM.”

RIM Co-Chief Executive Jim Balsillie said the deal shows RIM is serious about selling its software and e-mail services on competing devices.

Balsillie said the BlackBerry Connect program currently has "several tens of thousands” subscribers, but that should ramp up soon.

“There’s no question that there is a lot of demand for the Palm Treo in the marketplace out there. Certainly we see it in our customers,” he said.

Palm Inc. Chief Executive Ed Colligan said his firm pursued the alliance because he wanted to maximize choice for Palm’s customers.

“We both believe that cooperating has a stronger impact on our general business upside because there’s demand from both carriers and enterprise partners for us to work together,” he said.

He said Treo will also support mobile e-mail from RIM competitors such as Visto, Seven and Good Technology.

The alliance comes after Palm and Microsoft Corp. last month unveiled plans to offer a Treo cell phone running Microsoft’s mobile software.