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Three weeks ago, Palm CEO Ed Colligan described Apple's iPhone as "a highly developed media player, which happens to include a phone". But that doesn't mean he's being complacent. According to the New York Times, Palm has hired former Apple alumini Paul Mercer to work on a new line of products.

In 2001, Mercer's Pixo design house was contracted by Apple to help create the first iPod. While Apple never formally acknowledged its role, Pixo contributed the operating system, software layers, and hardware integration. Mercer himself spent years at Apple, contributing to System 7 and the Newton.

(Pixo is no more, but its part in the iPod's history was noted in this San Francisco Chronicle article.)

Mercer brings two employees with him from his current design house Iventor with him.

Palm hasn't updated its PDA range since autumn 2005, and its attempt to create a new product category with the hard-drive based LifeDrive failed to set the market alight. But hints and hirings suggest it has intended to return to the market with a more focused device.

Palm founder Jeff Hawkins, has been working on a new software project at his own company Numenta with Donna Dubinsky, which apparently implements a "heirarchical temporal memory component" - based on his own neuroscience work.

In a February interview, Colligan also made the observation that "our Palm Treo already has 90 per cent of Apple's iPhone features at a much lower price".

And that's something even Apple is sensitive to. COO Tim Cook told a conference recently that free phones are worthless.

"If we offer something that has tremendous value, that is sort of this thing people didn't have in their consciousness - it was not imaginable - then I think there's a whole bunch of people that will pay $499, $599," he told analysts at the Goldman Sachs technology conference.

In the USA that may be true - but in more mature markets such as Europe, consumers are used to getting the latest technology heavily subsidised. And here, both Palm and Apple have to compete with free. ®

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