Is Palm Dead?

With the poor results from Palm's latest quarter the results were inevitable. Everyone was going to pill it in on. It is a self-fulfilling prophecy. Palm is only going down because of articles like this one that says it's going down. I'd like to write a bit about that article. Rather than talk about the superior technology, Tony Bradley gets lost in the marketing. I agree that marketing is important, but superior technology is the first step. It's much easier to add marketing after the fact than it is to develop a superior product.

Let's look at the technologies Bradley listed as examples of superior technology, but poor marketing:

• IBM OS/2 operating system - According to Wikipedia - "Much of its success was because Windows 3.0 (along with MS-DOS) was bundled with most new computers.[11] OS/2, on the other hand, was only available as an expensive stand-alone software package. In addition, OS/2 lacked device drivers for many common devices such as printers, particularly non-IBM hardware." That doesn't sound like superior technology and it doesn't seem like marketing. It's pure business development. Windows got the distribution channel and OS/2 didn't.
• Sega Dreamcast game console - It can only run Sega Dreamcast games. A game machine with no games is completely useless. A smartphone without apps is still quite useful. (Note: Palm is not a smartphone without apps, I'll address this later).
• Betamax video tape players - See Sega Dreamcast above.
• HD DVD - See Betamax video above

If you are going to make the argument that Palm is like OS/2 (poor distribution channel), I'd respond that Palm still has the distribution channel. In fact, in the US it's bigger than Apple Iphones (two carriers, Sprint and Verizon to AT&T). If you are going to make the argument that Palm doesn't have supporting I'd point out that the Palm Plug-in Devlopment Kit (PDK) allows people developing apps for Apple to recompile them for Palm WebOs in just a few days. This means that large parts of Apple's App. Store is likely to be added to Palm's Application Catalog. This is something that Sega, Betamax, and HD DVD were missing. They can't essentially emulate the other technologies they were competing against. We can clearly see that Palm doesn't fit the mold that Mr. Bradley was trying to put it in.

Mr. Bradley also made the following point:

"Palm announced that it sold a meager 408,000 smartphones in the most recent fiscal quarter. That figure is less than 5 percent of the number of iPhones sold by Apple in its most recent quarter, and represents a 29 percent drop in sales from the same quarter a year ago. The outlook for Palm is bad, and getting worse."

The comparison to last year's results ignores history. In the quarter a year ago, Palm had a entry-level phone called the Centro that was available on Sprint, Verizon, and AT&T. The Centro was very cheap (possibly free with service contract?) as it was the end of the Palm OS life. The low price and broad distribution made it quite popular. From Wikipedia:

"As of August 2008, the Palm Centro was the second-ranked US smartphone based on internet traffic, responsible for 78% of the traffic on Palm devices[3]; it fell to fourth in February 2009, responsible for 86% of Palm traffic"

The PalmOS cycle ended with the Centro and the Palm WebOS ramped up. Of course the number of handset sales are going to drop when you make that shift and already start at a high point like Palm did. It should also be noted that Palm WebOs phones have only been available on Sprint and Verizon (and only part of the quarter on Verizon)... That's a distribution channel much smaller than the Centro had. That is changing as subsequent quarters will have full Verizon results and AT&T has announced that they will be bringing two webOS devices in the first half of 2010. That sounds like the outlook is getting better, not worse.

Another good point that Bradley makes is when he says:

"RIM and Apple are solidly in the lead, and Palm can't compete with the marketing clout of either Microsoft or Google."

I'm going to discount RIM because as Bradley says, "... BlackBerry platform is not innovative and has lost much of its appeal. RIM is basically riding on the coattails of its enterprise dominance, but offers little to compete with the iPhone and the growing list of next-generation smartphones." RIM might be running up against the same problem Palm had - an operating system that was fine for 2004, but not good for people's expectations in 2010.

With all due respect to Microsoft, they have yet to release a product and have no history of success. They are taking features (such as cut and paste and multitasking) out of the announced product.

That leaves Apple and Google. Both companies should be make carriers very, very afraid. Apple's dominance in the music industry shows that it isn't content just to be a technology company. That should scare any companies partnering with it. Google is even more terrifying as it seems to take over almost every market it enters. Everyone uses Gmail now and who uses MapQuest anymore? Simply put, Google, Microsoft, and Apple are all very big companies that have potential to use their clout to kill entire industries. Palm does not have that and that's a huge advantage when it comes to negotiating with other companies.

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Posted by brian on March 19, 2010 in Commentary, News. You can skip to the end and leave a response. Pinging is currently not allowed.