How Palm Could Change Everything

Palm (NASDAQ:PALM) is scheduled to hold a press event Jan. 8 at the Consumer Electronics Show in Las Vegas, at which it is expected to debut its Nova smartphone operating system.

Call it D-Day. Time to do -- or die trying.

Over the next two days, I'll game out two ideas for what Palm's hopeful sunburst will be -- one, a game-changer; the other, game over. Let's begin with the game-changer, an idea that would allow Palm to make good on board member Roger McNamee's pledge to "transform the cell phone industry."

Be kind, rewind with me
Innovators zig as others zag. That's the challenge Palm faces, to do something that neither Apple (NASDAQ:AAPL) nor Research In Motion (NASDAQ:RIMM) nor Nokia (NYSE:NOK) nor Motorola (NYSE:MOT) has done or is doing now. I can think of one thing: handwriting recognition.

Handwriting recognition has vexed the industry for years. Only a few have made it work well enough to win customers. Apple tried with the Newton, which, in turn, birthed a series of non-starters such as Go's tablet computer. IBM (NYSE:IBM) was even in on handwriting recognition for a time. Microsoft (NASDAQ:MSFT) had it in a tablet PC version of the uncommonly durable Windows XP operating system.

We tend to forget  that where these others failed, Palm succeeded.

Surely I can't be the only one to remember the old PalmPilot and its Graffiti recognition system, can I? Graffiti set the Pilot apart because it was an easy-to-learn language, and therefore a better alternative to deciphering barely legible scribblings.

Record sales followed. Press reports from 1998 show that the PalmPilot captured roughly 66% of the market in its first 18 months of release. More than 1 million units were sold, five times more than what Apple's Newton sold in its entire history.

The PalmPilot remains a cult icon to this day, so much so that the Graffiti language persists. Software called Graffiti Anywhere makes the language accessible to owners of the latest Palm devices, including the hot-selling Centro and Treo smartphones.

Can there be any doubt that a breakthrough in handwriting recognition -- Graffiti 3.0, perhaps -- would lead to commercial success?

A better business in Palm's hands
Imagine what might be if Nova were a lightweight, touchscreen Linux OS with advanced handwriting recognition, a new Graffiti for a new era.

At the very least, it would unite Palm's product lines and make them more extensible. Consider the failed Foleo. Built on Linux by Palm co-founder Jeff Hawkins -- a tech Hall of Famer if ever there were one -- it was pegged as a "smartphone companion." Think of it as a lightweight netbook. Yuck.

Foleo also needed emulation to run Palm OS software, bringing into sharp relief the company's failure to create a well-integrated family of products built on a common platform. Nova is an opportunity to change that, to be like more like Apple, whose Mac OS X is the secret sauce behind both the Mac and the iPhone.

Nova could also resuscitate Foleo. This is what I mean when I say "extensible." Platforms always are. Here, a Nova-powered netbook would be set apart by Graffiti. So would a Palm tablet. Or a new Treo. And each device would be interoperable with the others, because they'd have been built using common interfaces to the Nova OS.

There's a market for this. Palm's new Software Store already hosts 5,000 applications, and Linux is a popular OS with coders. Nova just has to be novel and have good tools for developers to work with. Handwriting recognition could supply the novelty; Palm will need to supply the tools.

But will it? I hope so. If our 125,000-strong Motley Fool CAPS community is any indicator, and it usually is, this is Palm's last shot at survival. Nothing less than a game-changer will do:

Data current as of Dec. 29, 2008.

D-Day is less than a fortnight away, Palm. You've got till then to show us something brilliant. If you don't, then it's likely game over. And none of us wants that.