Can Pre Save Palm From Being Put Out to Pasture?

94 Comments

palmpreToday, after a nearly year-long delay, Palm (s 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 (s S) 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 (s AAPL) 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 (s GOOG). 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?

94 Comments

Sam Kim

Om,
I don’t own any PALM, though I follow the company very closely.
And honestly, I think very few of us have really withheld our judgment. :)

-Sam

lemi4

I wonder if this will push the Centro’s price low enough that common Southeast Asians could actually afford it in masses…

I recalled an article somewhere where Palm was planning a 3-tiered product segmentation strategy where palmOS powered devices are low end, Windows Mobile Push-email-enabled business gadgets for the high end, and the webOS for the middle of the road. (Was it in Ars?)

Josh Baylin

Palm as a software company, just became a takeover target. Because what Sony Ericsson, Hewlett Packard, Dell, Samsung, Motorola and LG and others don’t have is an OS that gives them tablestakes – they all have opted in one form or another to: 1) go at it themselves; 2) use Microsoft; 3) Google Android; or 4) run from the space entirely – which is not a strategic option longer term. Palm is now in the same conversation as Android, Microsoft Mobile, Apple and Research in Motion – the others make phones.

See, Palm showed what it is and will always, be a user-focused operating system, even though it took an inept management team 2-3 years to realize it. Even in the Treo’s dying days – which continue every day as my friend Om astutely points out – people still like using it! Something which very few of the above can claim of their mobile experiences.

For the full story.

http://www.joshbaylin.com/2009/01/palm-its-the-software-stupid/

phil swenson

One other thought…. Sprint’s network in my experience is much better than AT&T’s.

Their customer service was terrible, but I had much better coverage in the 3 areas that I frequented while on Sprint…. Bay Area, Denver, and Kansas City.

Sprint actually worked in my basement in Denver. AT&T has been pretty bad from day one. I called to bitch about AT&T not working at all in my house (I’m 2 miles from downtown denver, not in the sticks) and they just said “our computer shows you in a good coverage area”. Their computer thinks I am in a good coverage area, but I can assure you I’m not :) I ended up having to buy a cell repeater to use it in my house.

thegeniusfiles

This is awesome news! In 2006. When it should have come out. Instead, Palm wasted time developing for Windows Mobile. Well, better late than never. Unless its already too late. Time will tell.

phil swenson

I reserve judgment until I try it, but they are definitely facing an up-hill battle. How many app stores will the market support? My gut is that html/js/css is not a good approach to dev mobile apps unless they wrapped up a bunch of cool native APIs for animation, etc. The money an interest is all iPhone right now. Blackberry and Android have a good shot. Windows mobile has some market share, but no one installs windows mobile apps.

If I were sprint, I’d go all-out for android. open the network completely to any device: there would be some really cool stuff that would come out if they just opened it up. Think wireless credit card processors, wireless parking meters, security systems, universal remotes for your home systems, etc. A lot of the stuff you see on the iPhone, but with any device running android you would see many other innovative products out there that aren’t possible with the iPhone because you are limited to Apple’s hardware.

Fazal Majid

I am an iPhone user but the Pre looks mighty attractive, mostly because it uses standard Web technology, not proprietary SDKs like everyone else (or crackpot languages like Objective-C/Cocoa), and it doesn’t have a walled garden like Apple. If it uses a JIT JavaScript engine like Webkit’s SquirrelFish (and unlike the iPhone’s sluggish JavaScript engine), you wouldn’t need to bother with native compiled languages at all. Interpreted languages like JS, Python or Ruby have massive developer productivity benefits over older 3G languages like C/C++ or Java, just see how quickly Adobe Lightroom (written in Lua) is progressing compared tp tje stagnant Photoshop (C++).

bud

If unlocked phones would be a boon to Apple, you have to wonder, what is the big advantage to a Sprint exclusive for the Pre? Wouldn’t it have been smarter to merely make the Pre available for ANY carrier?

Are carriers going to continue to rule the market, throttling what a customer may use? Does Sprint badly need a flashy smart phone for WiMax? Why isn’t ATT mentioned in press releases geared towards LTE?

Om Malik

@Sam Kim

Thanks for the correction on the date.

on the #3, i don’t own a single stock in any company no exceptions, except my own. any other disclosures are made on the site every single time. of course you should disclose that you are a holder of palm stock if you are going to ask questions :-)

on#1, yes you do have a point. #2, i am with holding judgment. we shall see in the market place — i don’t buy into press releases and keynotes very much.

HSK

Om – certainly agree on one thing – I take all of these “presentations” and online picts/videos and first reviews with a grain of salt until I see it “live”!

Sam Kim

“Palm reported a net loss of $506.2 million for its second quarter of fiscal year 2008. ”

Actually, you had it right the first time. That was Q2 FY2009. :)

Om, your point about the risk of cannibalization is a valid one. But a few other points are off the mark.

1. Getting $100 million from Elevation wasn’t a bad thing. Palm gave back $450 million in dividends to investors in 2007. It was a deliberate financial engineering move designed to give Elevation better returns. And it put Elevation in a position to take a bigger stake when Palm needed some of that cash back.

2. Palm hasn’t moved the needle forward? Please. It eliminates most of the iPhones shortcomings – with a physical keyboard, removable battery, cut-and-paste(!!!), and an open platform. And it introduces a better user interface that makes multi-tasking much easier. It’s also smaller than the iPhone. It’s even smaller than the Centro. And the Touchstone wireless charging? Sweet.

3. If you’ve sold PALM short, you should really disclose such information to your readers. :)

Jeffrey McManus

Every phone is just a mix of features, but this one happens to have the combination of features that I actually want (specifically, a real keyboard and a decent camera).

But the thing that is making me really want this is the developer story. They haven’t released their SDK yet, but it seems like they’re going to great lengths to make it easy for developers to create apps for the device. That would make this the first mobile device in history with a really easy way to develop mobile apps — certainly an order of magnitude easier than the iPhone or even Android. If it pans out, the developer story more than anything will be the Pre’s secret sauce.

If it comes to Verizon I’ll be first in line.

WebOS, Palm Pre and Enterprise Mobility | m|strat

[…] Can Pre Save Palm From Being Put Out to Pasture? -  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. (Placing GigaOm first since I agree with him the most… what’s all the hype about?) […]

Jens Andsers Bakke

I got to say, I’m excited about this.
Yes, the device looks good (reminds me a bit of my old Nokia 6600 in shape and size, which is good).
And for me as a web developer, working with clientside based solutions as well as AIR, the WebOS is realy good news!

As a developer, the idea of an os where the software is written with HTML+CSS+JavaScript is apealing.
BUT as a user, I’m kind of worried about it beeing the only “language” to write software in..
These days you kind of expect a mobile phone to be able to run JAVA based software, at least I do.
In addition, no flash support? So no youtube integration, for instance.. That’s a bummer these days.
A web phone with no flash..

What I think they should’ve done? Teamed up with Adobe and made the first AIR based phone OS..
FLEX+AS3+HTML+CSS+JS.. there’s a winner..

but all in all, I’m excited about the new OS, can’t wait untill it gets to europe so I can start developing..

gbp

Om,
I wish you were wrong this time. What do you mean by “In a market where the iPhone sets the pace, Palm is woefully behind the curve.” I don’t think so. iPhone is an excellent phone. Does that mean that you cannot ignore other smartphones. In response to a reader’s comment you mentioned that “Yes even iPhone lacks some of those but doesn’t mean it will forever. Just a matter of time before it changes. ”

The same holds good here. PALM will one up iPhone too. And so are Google, Nokia, Microsoft, RIMM.
Go back and check Padmashree Warrior’s blog when iPhone was released.
APPLE made a killing with iPod because Microsoft and Sony were fighting each other then with the gaming stuff.
Not this time , APPLE will have tough time with phones. The smart phone war has begun.

Here is my two cents
The coolest features of iphone are the multi touch, cool stable browser, APP store, Accelarometer,Proximity Sensor.
None of the iPhone killer phones release so far managed to do all of them , but the Pre did.

Then PALM even added a real key board, removable battery.
I don’t see a reason it cannot be a hit.
I might suspect their third party applications might not explode like App Store but PALM can streamline that.

Regarding SPRINT, I have been using it for 10 years , I never had issues with it in the east-coast corridor , NY-DC.

Again I wish you were wrong, and I hope you will change your stand once you get your hands on the Pre.

Alexander Horre

Who exactly designed the phone? That looks like a toss-away prepaid phone. I’m possibly looking at horrible pictures, but the iphone always looks wonderful in any light. With the iphone taking the smartphone tag and running away with it; the mainstream – in my opinion – will associate smartphone with luxury and novelty. With y the iphone you get the ‘everything works’ and ‘great looks’ that get the ahhs and ooohhs. This product? It doesn’t distinguish itself from any other black phone out there. For that, it’s a lackluster smartphone designated for elite early adopter geek niche, and android already took that.

The majority of phone subscribers still use their phones for chatting – essentially, also, explaining why SMS is so popular. It’s the middle ground of not chatting, not surfing mobile internet and synching devices, but still connecting.

It could be a revolutionary OS, but it’s in a lackluster shell.

Roland Exxo

All Things D’s John Paczkowski as skeptical as you Om, if not more. He did a pretty thorough takedown of the device yesterday right after it debuted. Money quote:

“Palm hasn’t raised the smartphone bar much (if at all) with the Pre. In fact, the device is as noteworthy for the features it doesn’t include as for those it does … will the Pre really be worth paying a premium for, as Colligan suggests? I’m not so sure–especially when the inevitable updates to the iPhone and BlackBerry remove the few advantages it does have over those devices. “Fast Web browsing” and “efficient multitasking” just aren’t big differentiators anymore.”

The entire piece is definitely worth a read:

http://digitaldaily.allthingsd.com/20090108/palm-to-price-itself-into-oblivion/

Rob Adler

The problem Palm faces is one of market and marketing. Reading between the lines of McNamee’s comments, Palm’s strategy seems to be that the market is so big that it can live profitably as number 3 or 4 in the market.

Palm really is in trouble if they are relying on Sprint to market the hell out of the phone. Can you imagine Steve Jobs putting the fate of the iPhone in the hands of ATT?

Om Malik

@HSK… AT&T is one of the worst services out there after the launch of the iPhone. I have tried Sprint in NY and San Francisco, my two primary markets and it is well not that hot.

On the features: i mean things like:

Stereo /music, 3G, WiFi, GPS, Bluetooth, fast, lots of storage (8GB), nice display (3.1-inch display, 320 x 480 — touchscreen) Touch, USB, nice jack for music playback etc.

Yes even iPhone lacks some of those but doesn’t mean it will forever. Just a matter of time before it changes.

Having being in the industry for too long, there is difference between hands-on at CES and hands-on in the hands of consumers. Just my two cents.

IvanM

This, in nutshell, doesn’t compete with iPhone and Android. This competes with Nokia’s N97 (although N97 won’t run on Sprint). It features the same type of apps (mobile web apps) which act more like widgets. It is very complicated to write a complex mobile web app, much more complicated than writing native app (screen workflow, AJAX, javascript libraries etc.).

However, this is great approach for simple widget like apps with few screens that any PHP developer will be able to develop and that actually is very good. However, remains to be seen how native functions will be integrated in the webOS. For example, if Palm doesn’t have map module ready for use within WebOs with a few lines of javascript code, then that would instantly kill majority of LBS initiatives. One of the main advantages on Android, for example, is full blown Google Maps library available for developers to use out of the box.

That been said, iFart type of apps, which are extremely popular on iPhone will definitely be possible on Pre ;)

This device will sell well on Sprint, will have its army of followers and a large pool of web developers ready to build web widgets spiced up with native libraries (e.g. camera access etc.). Again, very similar approach to Nokia where OEM (Nokia and Palm), builds majority of native apps and let’s army of web developers build web widgets that have access to native phone libraries (camera, vibrator, GPS etc.). it remains to be seen how many native libraries will be available to web developers with the first release of these devices.

HSK

Om, you mentioned the “feature set” is like any other smartphone sold over the holidays. Please elaborate on what features you think this, or any device of this size in the smartphone market, should have (or, as is obvious, what the iPhone does so much better than the rest)? I think the interaction as I saw it on multiple videos (and I suggest everyone go to treocentral DOT com and look at Dieter Bohn’s hands-on) with all of the apps was excellent. The video viewing may still be a question on the device, but everything else seems to be spot-on. Besides PIM, music, video and a good web experience (oh, and it should make calls too!), what features do you expect a new “phone” should have. Remember, it is not a netbook. I am not a Palm fanboy or an iPhone/RIM fanboy either (waiting on iPhone V3 and/or RIM Niagara), but I was pretty impressed with what I saw yesterday. BTW – I am a long time Sprint customer but have always told everyone to pick the carrier that gives you the best coverage in your primary market. So don’t bash Sprint just because they did not work for you – ATT does not work well for me (and I remember you complaining a while back about lack of 3g service on the Jesus phone…LOL!)

Celeste LeCompte

@JohnB. Thanks for catching that. We’ve corrected it above.

JohnB

“Palm reported a net loss of $506.2 million for its second quarter of fiscal 2009”

…shouldn’t that be 2008?

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