The Pre: Palm's Plot to Take on the iPhone

A few weeks ago, Jon Rubinstein was booking up the side of Mount Tamalpais in Northern California while I wheezed like a steam engine in his wake. This was irritating on two levels: 1) I do this hike all the time, and 2) he had already gone for a long run earlier in the day.

The executive chairman of Palm Inc., Rubinstein, a wiry 52, is a marathoner. So I persevered. I was trying to find out the answer to a question that's riveting the tech world these days: namely, Will the Pre save Palm? An iconic Silicon Valley company that pretty much launched — then lost — the smart-phone category, Palm has been teetering on the brink of irrelevance. But now it's fighting back with the Pre, the much hyped smart phone that Rubinstein & Co. have been working on for two years; it launched June 6 ($199 at Sprint stores in the U.S.) with all the expectations of a summer-movie blockbuster. (See TIME's video "Family Tech: Palm Pre vs. iPhone.")

You probably know that smart phones — cell phones as versatile as desktop computers and connected to the Internet — have been around for more than a decade. But thanks to the iPhone, the category has suddenly become white hot. (See the best inventions of 2008.)

Putting a Net-connected computer in everyone's pocket is expected to be a sensationally lucrative business. The planet pullulates with some 4 billion mobile phones, after all, and Palm says only about 10% of them are smart phones. During the next few years, that number may reach 50%. Morgan Stanley Research even described the migration to Internet-connected mobile devices as "one of the biggest opportunities in the history of the technology industry."

And that's where Rubinstein, a former Apple hardware engineer who oversaw the iPod division, comes in. His job is to restore Palm to its former glory and carve out a nice slice of the smart-phone pie. But to do so, Palm will have to compete with Apple's iPhone. Launched two years ago, the iPhone has created nothing less than a new way of doing business. By last January, more than 21 million iPhones had been sold; nearly 50,000 applications are now available for download at its online App Store. Rubinstein, an easygoing guy, smiles when we discuss this and points out that the market is large and expanding; Palm doesn't need to steal any of its competitors' customers to thrive. The smart-phone race is a marathon, not a sprint. "We're only at the beginning of the journey," he says. By that measure, the Pre represents the first couple of miles. (See a comparison of the Palm Pre and Apple iPhone.)

Yet if the Pre stumbles, Palm might never catch up. The industry sets a blistering pace, and Palm is already late to market. But if anything worries the famously secretive Apple (which, it goes almost without saying, declined to comment for this story), it has to be Rubinstein. He wasn't merely once an Apple insider; he was in the inner circle, a man close to Steve Jobs himself who helped overhaul the engineering processes core to Apple's turnaround. He worked on the top projects at 1 Infinite Loop and, for a time at least, got to see where Apple was headed. He's the guy best equipped to take Palm there too.

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