Listed below are additional criteria for this problem.

A. Strategic Alternatives (From IFAS)

1. Continue current horizontal growth strategy of combining PDA and telecommunications technology into all-in-one PDAs sold throughout the world.

Pro: Uses core competency to build a desirable product.

Cons: May not increase dollar sales, unless market willing to pay more for PDA communicators. Need to significantly increase marketing effort and expenses.

2. Follow vertical growth strategy of creating own operating system.

Pros: No longer reliant on Palm; eliminates licensing fee. May enable better integration between PDA and cell phone.

Con: Likely to significantly increase R&D costs unless Hawkins willing to lead it full-time.

3. Follow vertical growth strategy of acquiring manufacturing facilities.

Pros: May be able to reduce unit costs via process R&D; could improve product development function. Cons: Expensive and capital intensive; would restrict flexibility.

4. Investigate merger with Palm Computing.

Pros: Reunites founders with original company; brings Handspring's superior product development back to Palm; economies of scale and scope possible so can compete with larger companies. May increase sales and reduce costs in every area. Con: May not be enough to compete with very large competitors.

B. Recommendation

Investigate merger with Palm Computing. Given the maturity of the PDA segment of the computer industry, the industry is on the verge of consolidation. Handspring should be the first to join with Palm (or RIM/Blackberry if Palm not interested) to form a larger company with a stronger product development team.