Jag Venugopal's Blog

March 19, 2010

Whither Palm?

Filed under: Digital Living — Jag @ 4:00 pm

I have a soft spot for Palm, ever since the days I had my PalmPilot Professional, Palm IIIxe, Palm m150, and the Palm z22. Palm created a wonderful PDA that was fast, minimalist, and had unbeatable handwriting recognition with the original Graffiti script. As Palm became successful, they did not improve on their OS in any significant way ever, preferring to tack on additions with each iteration. The additions were all kludgy, and did not fit in with the original minimalist PalmOS. The biggest kludge IMHO was the incorporation of Graffiti 2. I never managed to get the keystrokes right. Nonetheless, Palm’s unique attributes were seamless sync, excellent battery life, affordability and fast performance.

Somewhere along the way, Palm lost it all. While they tinkered around with PalmOS and Windows Mobile, nimbler competitors took over the market space with next-generation innovation. Leadership in the smartphone market was ceded to the Blackberry, iPhone and more recently, Google’s Android based phones. All this while, Palm tinkered around with distractions like the Foleo, and the Palm Centro. When Palm finally came up with WebOS, it was a case of too little, too late.

According to Palm’s management (see http://seekingalpha.com/article/194491-palm-inc-f3q10-qtr-end-02-26-10-earnings-call-transcript?page=-1), the biggest problem facing the company is that Verizon and Sprint salespeople don’t know how to effectively sell Palm products. They claim that WebOS is a “highly differentiated” software platform. As my MBA professor put it, “highly differentiated” = “willingness to pay”. The problem is that no one’s buying Palm’s products. They don’t see enough by way of features and benefits for the “willingness to pay” to kick in. And it speaks to the utter cluelessness of management that the best they can come up with is improved training!

The central problem with Palm’s products is this: There is no compelling reason to choose Palm! There is no game changer either in the hardware, software, or marketing. What Palm needs is not more training of salespeople, but a game-changing product.

One part of the market that is as-yet untapped is the Prepaid/No-Contract smartphone market. Nokia has a few GSM smartphones that sell for around $200, but no one else sells at that price point. The game changer for Palm would be to market a version of the Pre/Pixi that can sell for $200-250, without a contract. To do this, Palm would obviously have to cut down its cost of manufacturing, and achieve economies of scale. But if Palm were to do it, that would represent a game changing approach. Neither the Blackberry nor the iPhone are available for anywhere near $200 without a contract.  Sure, Palm would bring up the low end of the smartphone market, but there’s likely money to be made there; they can be the “premium low-cost” offering, beating out the likes of Samsung, Kyocera and other also-rans. In a sense, that would harken back to the days of the PalmPilot, when Palm offered a compelling device for much less than what the other providers of the day (e.g. HP and Compaq) were charging.

There is chatter about Palm being a takeover target. I think it would be a grave mistake for any acquirer to buy Palm at anything other than fire-sale prices. Simply put, they would be hard-pressed to complete directly against Apple and Google, and even for that matter Microsoft. Palm’s hardware is generic and nothing to write home about. Finally, Palm is not much known as an “Enterprise” player, but if anything, a “Consumer” player. Potential acquirers such as HP and Dell would find the product a misfit in their portfolio of offerings that are targeted towards companies. In any case, RIM has a lock on the corporate market.


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