posted by Thom Holwerda on Mon 22nd Mar 2010 14:16 UTC
IconPalm. It's that big clunky part of your hand that doesn't get any of the attention - the fingers, the thumb especially, get all the glory. Just think, however, what your hands would be like if you didn't have palms, and your fingers just grew straight out of your wrist. Doesn't look so hot now, does it? Well, Palm is supposedly about to go under, if you were to believe the reports. Update: Palm has just announced that the Pre Plus and Pixi Plus will become available on AT&T in the coming months.


The present

In the media, you have to be very careful with predicting the downfall of companies or technologies. Apart form the obligatory "BSD is dying!", Apple has been declared dead as well, and, of course, after Vista, lots of people were claiming Microsoft was dying. The opposite is possible too; we're still waiting for this mythical "Linux on the desktop" thing, and we were supposed to have thin clients.

Now it's Palm's turn to get the "dying" label. The company hasn't been doing very well lately, and this has pushed several respected people to declare the company dead. Both Jean-Louis Gassée and Ars Technica's Jon Stokes are pretty clear in their assessment: Palm is dead.

"I'm afraid Palm will be twisting in the wind for a short while and then call it a day," JLG concludes, "A sad ending for the company that once led the Personal Digital Assistant (PDA) world and then made substantial inroads into the nascent smartphone industry with its Treo."

Stokes concludes something similar. "For all of its software advantages, developer support remains tepid, and the PDK launch at this past GDC - as exciting as the resulting games look - is too little, too late. Then there's the Pre and the Pixi hardware—neither of these phones are really able to do webOS justice. The company simply doesn't have the time or the cash to recover from the mistakes outlined above by doing a round of fresh hardware launches and launching a major new marketing push," Stokes writes, "So stick a fork in Palm - it's done, the dream is over. It's only a matter of time before the company is acquired or goes belly up."

Those are pretty harsh conclusions, but looking at the figures, it's not a crazy conclusion to draw. I still believe that there is a danger of this being premature, but at the same time, the future is looking very bleak indeed.


The past

Where did it go wrong? The Pre and the webOS were unveiled to raving enthusiasm early 2009, and Palm looked poised to re-storm the smartphone market as a credible competitor to the iPhone. Android was still a mess back then, and the iPhone 3GS wasn't out yet. Somewhere between January 2009 and now, things went wrong. Both JLG and Stokes offer their insights - let's look at some of them (you can read the rest on your own).

JLG obviously looks at the executive, company side of things, and he concludes that Palm has made a number of mistakes. For instance, he thinks Jon Rubinstein, Palm's CEO, didn't want to give in t Verizon's demands, leading him to Sprint - a rather disastrous choice. Verizon would've been a much better carrier partner than Sprint.

JLG finds Rubinstein's latest excuse - that the launch of the Droid on Verizon two months before the Pre Plus hit - embarrassing. "Jon always knew Verizon to be a better channel than Sprint, 91 million subscribers for Verizon vs. 48 million for Sprint," JLG argues, "What very probably happened is this: initially believing his own propaganda, Ruby didn't want to yield to Verizon's demands. Palm's CEO bet a successful launch with Sprint would cause the bigger carrier to come around - only to take a less advantageous deal later and too late. By then, everyone knew about the Pre's tepid reception at Sprint, taking any leverage away from Palm in discussions with other carriers."

Furthermore, Palm engaged in "stuffing the channel", a practice which reeks of desperation. Stuffing the channels refers to pushing a lot of products into the channel, basically shipping more than is needed. This can turn into a disaster - which is exactly what happened.

"One analyst [...] pegs the total unsold inventory at 1.15 million units. That's half a year of sales - if things go well," JLG writes, "If sales tank because consumers lose faith, or because competitors do a good job, or if you need to introduce a new model that obsoletes the aging inventory, the channels backfires." In this context, backfiring refers to the clause in many distribution agreements which allows distributors to return surplus stock at discounts.

Ars' Jon Stokes looks at the consumer side of the story, and there, the situation isn't much better. Palm's App Catalog still hasn't taken off, and while you can argue that most of the 100000+ applications in Apple's App Store are pure and utter junk (and they are, dear lord, they are), this "long tail" ensures that there's always something in there for someone - much like the situation on Windows, really. Linux and Mac OS X suffer from this every day: many Windows users have this one tiny minuscule application that they want, which isn't available on any other platform.

Then there's the alleged hardware issues. It's still unclear as to how bad the hardware problems with the Pre really are, but Stokes' own anecdotal evidence isn't very positive. "Even if I happen to inhabit some vortex of Pre malfunction, and my experience is totally atypical, it's still the case that only a slightly elevated return rate is bad news for a fledgling smartphone like Pre," he argues, "The one thing people don't want with a phone is trouble. A glitchy phone is a terrible thing, and given the kinds of situations that people use their phone in (driving, cooking, running, secretly during a meeting, in an emergency, etc.), the average person's tolerance for phone gremlins is zero."

Marketing wasn't Palm's strong point either. They tried to market the Pre to women, which led to an interesting exchange between Kara Swisher and Roger McNamee, the over-confident Elevation Partners figure. Palm also pushed ads with a lady who was universally deemed "creepy".

We haven't yet touched on what I think has been the biggest mistake: Palm acted as if it was Apple (which isn't strange considering Rubinstein's history). They thought carriers would line up to sign exclusive contracts with Palm for the Pre, but this turned out to, well, not be the case. What's worse is that the rest of the world - a considerably larger market than the US - had to wait incredibly long for the Pre to arrive, and to this day, it's only available in a small number of countries.

I already made it clear in the run-up to my iPhone 3GS review: I would've bought a Pre if it weren't for the fact I couldn't, and still can't. My only option then would've been to buy an unlocked Pre from Germany, but that one has the wrong keyboard (Germans use QWERTZ instead of QWERTY), which isn't ideal. On top of that, I want a properly supported phone, including warranty and such, and while I love Germany, going down there to have my phone serviced seemed a bit, well, ridiculous.

It was dumb of Palm to act as if it were Apple. Especially here in Europe, the Palm brand doesn't carry a whole load of weight, and you'll receive mostly blank stares from people when you mention the company. In Europe, they should've offered it as if it were any other phone from day one, allowing carriers here to market the device the way they deemed fit. Sales would've been considerably better.

It seems that what is bringing Palm down is a combination of bad business decisions, shoddy hardware quality, bad marketing, and an unhealthy dose of ὕβρις.


The future

This leaves us with what the future will hold for Palm. It will come as no surprise to anyone that I like Palm. It has always been an innovative company; first with PDAs, later with their Treo smartphones, and recently with webOS. The company is willing to take a different route, willing to come up with something before anyone else does.

I've owned several PDAs (and still do, although I'm not sure any of them even work), and I sure had the fondest memories of my Palm Tungsten E2. The cruelty here is that back in those days, Palm had the hardware, but the PalmOS operating system was horribly outdated and crash-prone. Now, they have what some consider to be the most advanced smartphone operating system, but the hardware just isn't up to par - both in a narrow sense (the Pre itself) as well as in a broad sense (battery hardware isn't powerful enough to handle the webOS' multitasking).

The future for Palm is either the company will fold, or someone else will snatch it up at bargain price. Many contestants have been mentioned, but recently, a lot of people seem to suggest something that makes a lot of sense. If there is one company who would benefit greatly from acquiring Palm - it's Google.

Now that Google is indirectly involved in a massive patent lawsuit with Android competitor Apple, Palm is looking like a very attractive acquisition. Not only would it give Google access to the webOS and its features (which could possibly be integrated into Android), but the search giant would also gain access to a whole bunch of former Apple engineers, as well as an enormous patent portfolio Palm has accumulated by being an innovator in both the PDA and smartphone space.

In other words, it wouldn't only benefit Google's own products, but it would also be another provocation towards Apple.

All I ask of is that the Palm brand continues to exist. The name may not mean a whole lot to most ordinary people, but as a geek, Palm holds a special place in my heart, alongside companies like Be and Amiga. Can you imagine top-notch Palm hardware powered by a hybrid between Android and webOS?

I think my inner-geek just fainted.

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