John Markoff writes in The New York Times (registration required) that Palm has brought on former Apple engineer and Pixo founder Paul Mercer to work on “a new line of products”. The Times’ take is that this is in direct response to the iPhone. This could well be correct, or it could be the long-awaited “third category” of product to spring from Jef Hawkins’ mind. It’s certainly wise to take any new competitive threat seriously, particularly one from a company with the design expertise and marketplace momentum of Apple, but I find the Times’ characterization of “shaking up the cellphone industry” premature despite Apple’s claim of handset reinvention.

In any case, what needs shaping up is the Treo form factor, which appears on the shelf as a chubby Blackberry alternative. Treo pressure is coming from the sudden wave of popularity enjoyed by cheap Windows Mobile smartphones such as the Q, Blackjack and Dash. Differentiation from these workalikes is more important than matching the iPhone’s new directions.