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Summary:

Today, after a nearly year-long delay, Palm announced WebOS, a brand-new web-centric mobile operating system, and the Palm Pre, its first WebOS-powered device. With this twin release Palm hopes to stage a comeback in the mobile business. But while most gadget gurus seem to be quite taken with the newest shiniest object, I remain highly skeptical of Palm’s chance to succeed with this new effort.

palmpreToday, after a nearly year-long delay, Palm announced WebOS, a brand-new web-centric mobile operating system, and the Palm Pre, its first WebOS-powered device. With this twin release of seemingly cutting edge products, Sunnyvale, Calif.-based Palm hopes to stage a comeback in the mobile business.

While most gadget gurus (and lots of readers who follow me on Twitter) seem to be quite taken with the newest shiniest object, thanks to Palm Chairman Jon Rubenstein’s magic, the power of a press release and the drama of a CES keynote, I remain highly skeptical of Palm’s chance to succeed with this new effort. I may be the only one who isn’t buying it.

Many seem to have skimmed over the fact that the Pre has features that are typical of any smartphone sold over the holidays. Sure, it looks better than some Microsoft Mobile devices, HTC’s Tilt or some of the Samsung devices, but it its feature set is no different than, say, a Nokia E71. As Michael Gartenberg points out, Pre’s feature set is the equivalent of table stakes in order to play in the smartphone business. That said, he likes what he sees:

The UI is smooth and works pretty seamlessly as they’ve showed. Palm’s always understood how to do a good mobile UI and it’s clear that they’ve applied everything they’ve learned over the years to this device and platform. The Synergy technology is very impressive.

So what? That doesn’t guarantee success. I don’t think Pre has done anything to move the needle forward, though its backers — including the affable Roger McNamee — are waxing eloquent about its potential. In a market where the iPhone sets the pace, Palm is woefully behind the curve.

“Our intention was never to build an iPhone killer but to build a killer Palm product,” Rubinstein, a former Apple executive who was brought in as the executive chairman of Palm to work miracles, told The New York Times. Actually, it’s more like a Palm killer!

The Pre, which will be available on the Sprint network, won’t be released until sometime in the first half of 2009 or, as CEO Ed Colligan told the reporters in Vegas, “as soon as possible.” Technically, June 30 is in the first half of 2009. From now till the time Pre launches is going to be a crucial time for Palm. Every single day will push the company deeper and deeper into the hole it’s dug.

Why? By announcing its product too early, Palm has turned up the hype cycle around its new product offering, and that means fewer sales for its existing products. Palm and its carrier partners were already having a tough time pushing Treos out the door, and now those carrier partners are going to be none too happy. With a new Palm device on the horizon, carriers have less of an incentive to push the company’s current devices, and that means a further decline in shipments.

Last month, Palm reported a net loss of $506.2 million for its second quarter of fiscal year 2009. Sales sank to $171 million, and its shipments decreased 13 percent. It had to go to McNamee’s Elevation Partners to get $100 million in funding to keep going.

For argument’s sake, lets assume the Pre does come out on time and starts selling like hotcakes. It still doesn’t necessarily mean success. About 40 Android-powered devices are slotted to make their way to the market this year, and I am not sure if guys at Apple are resting on their laurels. An OS upgrade, a new phone form factor is among things we should expect from Apple in 2009. What that means is that Palm would be playing catch up in the marketplace with a clear leader and dozens of desperate competitors. Palm will feel the financial squeeze, especially in 2009 when the economy remains in doldrums.

Now, lets talk about the Palm WebOS, its new operating system. From what you can read on the web, it seems to be one heck-of-an operating system, that is oozing with smarts that include live searching (of the entire phone and the Web), Unified address book (Facebook, Outlook and any other address books), Unified calendaring and dozens of other such features. They even have a Webkit-based browser just like an iPhone and Symbian- and Android-powered phones. It sounds so promising that I actually want to try it out – though, after being forewarned by my readers, becoming a Sprint customer is out of the question.

The question now is, will Palm be able to get a lot of developers to come and develop for the platform? Yes, we know they have a loyal community and millions of developers, but the momentum is with Apple and Google. As I pointed out earlier today, the iPod Touch is the secret weapon that makes the iPhone-platform attractive to the developers.

So, now you know where I stand. What do you think about Palm and its prospects?

  1. You West-coast & big-City guys always dis Sprint, but here in Michigan it is the best (& cheapest) game in town. Good data for 5 years, great data for 3 years, 3G in most cities (not just Detroit!). Compare Verizon & AT&T which just barely introduced EVDO or EDGE or 3G in the last few months. And nothing at all to/from the beautiful north (e.g. Traverse City) where I spend summer weekends. It’s all about the network!! My Treo is getting long, long in the tooth, even though it is still the smartest interface around. The Pre ought to be the next great thing for me.

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    1. @Pat

      I am sure you are right about Sprint in Michigan. My family is there and they are happy but of course on the coasts they find it hard to use the service. Good luck with The Pre when it comes and come back and share the experience. Of course one must not forget that they are going after the smartphone buyers – and many do live in cities where they have terrible coverage.

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  2. Om, you have no idea what you are talking about…STFU and do some hands on research for once.

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    1. @omisianidoit like all those geniuses who did hands on research and yes when it comes out i will do the hands on research. i just hope that you had the balls to use your real name if you were going to call me an idiot.

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  3. Om, please give Palm the benefit of the doubt. Historically I think Palm is sort of going through what Apple did after Steve Jobs returned. A slow resurgence of Palm is on the way and I can appreciate that from a consumer point of view, essentially it will drive further innovation in a very competitive industry. Microsoft,RIMM your move. I would suggest you hold out on the predictions for the moment remember Hulu?

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    1. @ryclarkeus

      Of course I give them the benefit of the doubt, and if I am wrong, then I am wrong. Yes, Hulu prediction I remember – and I reversed my opinion. Lets see what Palm does now. As I said: not buying the press release, keynote and talk. They need to put the devices on the shelves.

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  4. This is a cool one. I like the round style..

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  5. Excellent points, Om. While the new WebOS is certainly slick, and has some killer features around connectivity, I don’t think it’s enough to really save the company. The pre, imo, is just the black, egg-shaped nail in the coffin. As you mentioned, it doesn’t have any features that aren’t available across the majority of smartphones already on the market – much less those that will likely to be available by the time the pre hits shelves.

    Also, as you mentioned, the time frame for launch is….well, even today, it’s delayed, much less if it doesn’t come out till June. Add to that the lack of announced price (usually not a good sign), and the fact that Palm went with Sprint, the smallest of the four major carriers, and also the one struggling to make ends meet, and the pre has the odds stacked heavily against it.

    Obviously, I don’t know full financial details of Palm’s business, but if the Centro, which is now available across 3 of the 4 major carriers in the U.S., isn’t enough to save the company, launching a single phone, up to 6 months from now, on the smallest (and shrinking) of the 4 major carriers is surely not a great way to turn a company around.

    With phones such as the N97 coming out, and the iPhone due for an update, and Nokia’s budget-priced E63, not to mention the countless other qwerty smartphones coming across the carriers soon, I just can’t see how the pre is going to do much damage. Even you were already warned by your readers not to get in bed with Sprint (you have wise readers, btw, I’ve been there, done that, it’s ugly.)

    It’s kinda interesting that two major companies have tied this little black egg around their necks for 2009. The only thing more perfect is if Motorola had built the hardware or something.

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  6. Very good points om,especially about the relear date. But I think he iphone shows how far a great ui can take you in the still-young smartphone market. Palm doesn’t have the itunes ecosystem to leverage but the pre is a good step for a company that’s on life support.

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  7. Om, you’re right when you say Pre alone won’t be able to turn around Palm’s fortunes. But I think you’re being too hard on them in areas where they’ve done a capable job, and not hard enough on areas they ought to improve on.

    Palm Pre’s features may be on par with the Nokia E71 (and therefore table stakes), but so what? Damned if they did, damned if they didn’t? They’ve shown themselves capable of building a phone that can compete seriously on features and user experience. Even the Centro wasn’t a badly designed smartphone per se.

    But Palm probably won’t see a pickup in sales because i.) they haven’t been able to articulate a vision for the future, ii.) they don’t have a firm set of targeted product lines with reasonably predictable release cycles iii.) from developers’ perspective, Palm aren’t committed to a platform – their more recent Treos ran WinMobile, the Centro ran PalmOS, and now Pre runs WebOS. I have contrasted Nokia’s prowess on these counts with Samsung’s in an August 2008 article (http://www.rahulgaitonde.org/2008/08/14/samsung-needs-a-brand-strategy/).

    It’s impossible for them to build hype around a product (unlike, say, Apple or Nokia) because no one (buyers, carriers, developers) have any idea what Palm is going to throw at them, why and when (or at all).

    Palm is looking to every new release to save their sagging fortunes. That isn’t a healthy sign at all. That’s evidence enough that they aren’t looking long-term. Heck, they’re just looking to ride out the next quarter and then hope for the best.

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  8. Om : Why such gloom ?

    The WebOS is the best thing to happen to Palm in years and here are some counter points (to the rather excellent arguments you have made)

    1) The other palm products are windows mobile powered treos for enterprise and centros for the just entering smart phone crowd – Both these segments are not going to buy a Pre right now. The hope is eventually they will. So cannibalisation is not really an issue

    2) Sprint will market the hell out of this phone. Strong marketing caused a samsung instinct to ratchet up good sales inspite of being a crappy device … Sprint is a decent network for some people and is in need of a good device to prevent people leaving. The Pre is just that device…

    3) The os is amazing and revolutionary especially the app architecture – The UI alone seems way more polished than android … The device is better than the G1 .. Sure Android powered devices next year will give Pre’s headaches.. But the device and the OS can compete …

    4) By taking a rdically different approach to apps (HTML/CSS/JS + Mojo) Palm has made writing apps more accessible. Expect a lot of web2.0 apps almost immediately

    5) Finally a phone which can challenge iPhone aesthetically !

    6) A well integrated IM is missing from the iPhone among other features – This device can compete with the iPhone in some segments …

    Palm may or may not survive financially and in that case expect them to be acquisition bait for all those who have been trying to create iPhone killers and failing – I am looking at you Nokia …

    Palm has the technical chops to survive – The problem is the current recession makes their financial survival hard. That said considering the mediocrity around them and the long term strategic importance of the smartphone space I hope the webos is still around ! The alternatives are too hard to bear and Apple will walk away with this market uncontested …

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    1. @Yuvamani

      Good points – I agree they have done the good job of the WebOS and lets see if this is going to be enough.

      #1. cannibalization is an issue – why would you want to buy a lesser smart phone when a new, shiny one is going to come.

      on your point #2 — lets see how that goes. Sprint will market a lot and then what? Remember Verizon marketing the blackberry scream.

      #3, It can compete for sure, but the company doesn’t have the deep pockets for prolonged fight. We shall see if they will. I think there is a lot of emotional attachment with this company and the fact is that everyone loves a phone that is much like any other phone tells me that people want it to win. So they got that going for them,

      On point #5, lets just say you and I have different measure of aesthetics.

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  9. We can hope that when Palm goes out of business they’ll opensource WebOS….

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  10. The API is HTML, CSS, and JavaScript. HTML5 storage. Multiple apps running with a JSON message bus. This thing is going to awesome for making mashup type apps.

    This is the first “cloud” phone. I would have thought Om would have liked that.

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