Palm is walking a tightrope between the success of its current operating system and the demands that new processors, applications and memory are making on it.

An increasing number of handheld PC makers have migrated to Microsoft's Pocket PC or the open-source Linux system from the Palm OS. They're willing to pay the price in higher memory requirements to gain vital programs and more powerful processing than Palm currently offers.

Palm is responding with plans to shift a radically rebuilt operating system from the current Motorola Dragonball processor in Palm PDAs (personal digital assistants) to the Intel ARM7 chip.

"The operating system platform needs to support the level of functions and services that our developers require," says Alan Kessler, general manager of Palm's platform solutions group.

"The operating system kernel is not the issue [for developers]," he says. "It's the APIs (application program interfaces) and the programming model that are important." APIs are software components that allow different platforms to talk to each other. For example, Winsock is an API that allows Windows OS and programs to talk to TCP/IP systems for internet access.

Kessler likened the move from Dragonball to an ARM-based operating system to switching your car's six-cylinder engine to an eight-cylinder one. The updated machines will have more power and go faster but will still run in essentially the same way.

Kessler acknowledged such a major reworking of Palm's core software is risky. "But if we don't move aggressively to innovate you'll be sitting there and saying, 'Mr Kessler, you were number one [in the market]. How could you lose that by not innovating fast enough?'"

Part of the operating system project includes a memory protection scheme in which each application runs in its own protected area of memory so that a single malfunction doesn’t crash the entire system. Another effort is creating a password that will turn on encryption, enabling the OS to encrypt all data for protection.