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Summary:

The last few weeks have been dominated by speculation over two things: the Google Phone and the Apple tablet. One is now a reality. The other is still a myth. And beyond this twin-headed meme, attention has been paid to little else. Forgotten is the fact […]

The last few weeks have been dominated by speculation over two things: the Google Phone and the Apple tablet. One is now a reality. The other is still a myth. And beyond this twin-headed meme, attention has been paid to little else. Forgotten is the fact that BlackBerry is still outselling its rivals and its brand-new 9700 Bold (with touchpad) is arguably the best device the Canadian company has ever made. Also forgotten in the Google vs. Apple battle is a little company called Palm.

Palm Pre

Yesterday, I stopped using my Nexus One and resumed using my BlackBerry Bold. (Which explains why I’m once again returning emails and text messages in a timely manner.) I also looked again at the Palm Pre, which had been sitting at the bottom of the drawer, gathering dust. I couldn’t remember exactly why I had stopped using it — though it helped that AT&T’s mobile chief, Ralph de la Vega, today confirmed that Ma Bell was going to start selling the Pre and its younger brother, the Pixi, in 2010.

Verizon is going to start supporting the Pre as well. With Sprint already in the bag, it seems like Palm finally has the ability to address a big enough market. Of course, it also means the company can no longer claim it doesn’t have enough carrier partners. Helping it get to this point was the fact Palm’s main investor, Elevation Partners, has kept the faith.

In an interview with Bloomberg, Elevation co-founder Fred Anderson called its investment in the company a “marathon,” and said his firm “hasn’t taken money off the table because we see a huge market opportunity here.” Elevation has invested a total of $460 million in Palm since 2007 and has seen the stock grow threefold in 2009 alone. I admire these guys for keeping the faith.

After coming off my 10-day Nexus One stint, I realized that barring the iPhone OS, webOS, which powers Palm’s devices, is perhaps the most complete and polished operating environment available. It’s also far more elegant and seamless than either Nokia’s Maemo or Google’s Android. I guess that’s one of the reasons why there’s ongoing speculation that someone — Dell, Nokia or Microsoft — will buy Palm.

Maybe — and maybe not! In the meantime, the big question is: Can the company stage a comeback? I have not been shy about my feelings as to Palm’s increasing irrelevance, antagonizing Palm fans in the process. There were four basic challenges that were facing the company, in my opinion:

1. A weak brand.

2. A weak balance sheet.

3. Deep-pocketed competitors, including one with a massive customer base.

4. Being late to the market, thus giving it a weak app store.

What I liked about Palm:

1. Its developer community.

2. webOS.

3. Vertical integration of its hardware and software à la Apple.

Palm Pixi

Palm has had to face the challenges I outlined last year and has continued to struggle. And should the Palm fanboys get upset by that assessment, here is the company’s latest quarterly performance: In the second quarter of its fiscal 2010 period, the company shipped 787,000 smartphones, in line with what Wall Street was expecting — and down 5 percent from what it shipped during the first quarter of fiscal 2010. Which means that five months after it was launched, the Pre is already beginning to lose steam. And don’t forget that also during that fiscal 2010 second quarter, the company put the ultra-cheap Pixi on the market.

That’s why I still think the odds are against Palm. Still, I would give the company a one-in-five chance of being relevant in two years — as long as it does three things:

First, it needs to make its hardware less complex. It took playing around with the Pre again to remember why I had hated the device in the first place. While the team had done a good job of coming out with an attractive product — Droid makes it look like a work of art — the device’s user experience was stuck in a previous era, as evidenced by the multiple input options (keyboard/touch) and multiple buttons. So in fact, what I hated was Palm’s Handspring legacy. What the company needs to do is go back to the drawing board and come out with a simpler touchphone: no keyboards, no buttons, nothing.

Second, it needs to get its app ecosystem going. The single biggest asset Palm has is webOS. As such, it needs to drive home its web-friendliness amongst developers. And in order to do that, all Palm has to do is look at its past — it had developers and apps long before apps were the new black. It needs to get the number of apps up from its woeful 800 to a more respectable number — say, 10,000. It should start by looking at the top 1,000 apps on the iPhone App Store and get them onto webOS. And if it means actually paying developers to keep supporting the platform, so be it. The good news is that the company knows this. Investor Anderson told Bloomberg: “We have to establish a very strong developer ecosystem…a critical mass of very high-quality third-party applications.”

Third, it needs to get over its Apple complex. CEO Jon Rubenstein and other Apple alums who walk the hallways of Palm need to get over their fixation with Apple and Steve Jobs. You guys are not Steve and your company isn’t Apple. What you are is Palm, a once-iconic PDA maker with decent developer support and a brand that is as hip as Fred Perry. The good news is that Fred Perry is hot again. And seriously guys, stop taking media relationship tips from Apple. It is virtually impossible to even get anyone from your company on the phone anymore, including your CEO. That elusiveness doesn’t work for a company that’s having a tough time getting market traction, doesn’t have the story or the products. You needs to get the media on your side, which means talking to the folks who live and breathe this smartphone stuff.

These tips aside, the company needs to show more urgency or it will continue to lose relevance in this high-stakes war.

Related posts:

Palm Should Go All In With Its Pre Marketing

Palm to Developers: We Love You, We Want You.

Spring in feature photo image courtesy image courtesy of Flickr user oskay.

This article also appeared on BusinessWeek.com.

By Om Malik

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  1. Very good analysis. In fact the best i have seen on this topic. Somehow palm hasnt gotten this message. Their developer support needs to get lot better for them to stay relevant.

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  2. I would say that if you took all of the speculation regarding the iTablet, produced a similar profile for the Web OS, and had show it to folks that the Palm product would be incredibly viable. Slap it on a NetBook, similarly. This simply reiterates the deep pockets point, but a company with a need to develop those types of products should consider Palm.

    Without product, developers are not going to develop fully motivated. That is simply not possible without product, and the ability to go global. In my mind, the only way this is possible is with a pick up by Nokia. Interesting stuff!

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  3. In the movie Event Horizon, everyone who visits a stricken spaceship becomes consumed by homicidal rage. At Palm everyone just suffers from ego-inflation and torpor. Either combination is lethal, but at least Palm’s takes longer and the corpses will have smiles on their faces.

    I guess my only question, Om, is: Why do you keep trying to call them?

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  4. Totally agree with you about the Bold. I recently switched from the iphone and really like it. It is the right size for my hand and the keyboard is great.

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  5. The hardware is lousy

    They have not been able to get developers interested.

    The OS needs work, it slows down as you use it which makes me think memory leaks.

    Palm needs their own sync software, using iTunes was stupid.

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  6. Om,

    Are you sure you were using a Pre … I think you may have been looking at the wrong phone. What are the multiple input options? There is no stylus use. It’s a touch screen phone with keyboard and there is one button on the phone. If that’s too complicated for you I don’t know what to say.

    Also, there are over 1,000 apps currently in the App Catalog.

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    1. Yeah even I was wondering about the same. Maybe Om does not like the physical keyboard, but then he does use a blackberry. I am confused.

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      1. Maybe there are good keyboards and bad keyboards?

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    2. The company officially says 800 apps.

      The stylus was a mistake. Force of habit from old days. Sorry about that and I have fixed it.

      Multiple input: keyboard and touch are almost always going to be confusing and distracting. Same issues with Nokia N900 and Droid. Doing too many things.

      Simplicity is the key and Palm needs to focus on that.

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    3. I was going to make a similar point. You can’t say, “Palm needs to stop trying to be like Apple,” while saying, “Palm needs to make a phone that’s exactly like the iPhone in every way.

      I have a Pre, and I agree that the keyboard is not perfect, and that hardware keyboards might not be for everyone. However, I don’t think ditching the keyboard is the answer. I think that Palm should keep iterating the Pre, and just add another device running WebOS in an iPhone-like slate form-factor with a virtual keyboard.

      Blackberry has the Bold AND the Storm, and they let the customers decide. Sure, Blackberry’s OS is awful, but there’s no reason that Palm shouldn’t apply WebOS to a number of form-factors.

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  7. Great analysis, Om. But I’m afraid your Blackberry is also (going to be) facing major obstacles. While the Pre may be hampered by its Handspring legacy, the Blackberry will soon be hampered by its email legacy.

    Per my own rankings, both are likely to face middling growth or get bought out in the next couple years.

    http://www.brianshall.com

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  8. I think some 2010s should actually be 2009s.

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    1. Actually no…

      second quarter of fiscal year 2010, ended Nov. 27, 2009
      first quarter of fiscal year 2010, ended Aug. 28, 2009
      fiscal year 2009, ended May 29, 2009
      fiscal year 2010, will May 29, 2010.

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  9. Palm needs to find a buyer. Microsoft would be good.

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    1. no, please

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    2. I have some other ideas :-)

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      1. Now we know , I bet you knew this moto palm thing is cooking.

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  10. The Nexus One didn’t interest me because it seems to me that the webOS offers a far better experience than Android. It just seems to be better put together. Now if they can only license out their OS or give us more choice in terms of hardware, I would be interested.

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