It's shocking, but one might wonder what took the company so long: Palm, which rose to fame creating PDAs based on the simple Palm OS platform, this week announced that it's licensing a competing system from Microsoft to power its next Treo device. The next-generation Treo 700 will ship in early 2006 and will run Microsoft Windows Mobile 5.0, providing a solution that Palm says its enterprise customers have been longing for.

"Microsoft and Palm in the past obviously competed, but things have changed," said Ed Colligan, president and CEO of Palm. What's changed is that both Microsoft and Palm have been unable to defeat Research In Motion (RIM), whose keyboard-based handheld devices control the mobile email market. The Treo 700, which also sports a keyboard, is designed to offer the best of both Palm and Microsoft in one unit, giving both companies the ammo they need to take down RIM a notch.

What's most intriguing about this partnership, perhaps, is that Microsoft let Palm tinker with Windows Mobile 5.0, which is a first. The version of Windows Mobile that Palm will ship in the Treo 700 will include several unique features not found in the typical version of Windows Mobile 5.0, the companies say. For example, users will be able to dial a phone number by pressing a picture of a contact on the screen.

One feature the Treo 700 won't have--at first--is the ability to automatically receive email, which has been available on RIM BlackBerry devices for quite some time. However, Microsoft and Palm say this "push" feature will be added later, after a Microsoft Exchange upgrade that adds that functionality on the server side.