18 Comments

Summary:

Shares of Palm tanked after the company said carrier orders for its webOS gadgets have been weaker than expected. Customers don’t want its phones, and no one seems interested in buying its business. So what can be left for Palm?

Palm has cut its revenue forecast and said its third-quarter numbers will disappoint, sending its shares plummeting. In the meantime, there’s plenty of speculation about potential suitors, but scant evidence that anyone is actually considering buying the venerable manufacturer. So if no company want to buy Palm and consumers don’t want its phones, what does it do now?

After Sprint’s disappointing run as the exclusive carrier of Palm’s webOS gadgets, Palm had pinned its hopes on Verizon Wireless, which recently launched the Pre Plus and Pixi Plus. But the nation’s largest carrier failed to provide much of a boost — thanks to a consistent lack of effective marketing — forcing Palm to concede that consumer uptake has been slow and carrier orders have been weaker than expected. And while AT&T is set to launch webOS devices in the next few months, Palm’s hardware has little chance of attracting much attention in any lineup that includes the iconic iPhone.

It’s a nightmare scenario for Elevation Partners, which has poured $425 million into Palm to keep it running. The Palm operating system, webOS, has garnered praise as a worthy rival to iPhone OS and Android, but a lack of traction in the marketplace has prevented Palm from building out its app store, as Kevin noted last week. PC vendors such as Dell or Hewlett-Packard could step up and take over Palm, which at last check had a mere $1.12 billion market capitalization, but thus far no one appears to be nibbling.

Palm still has $590 million in cash vs. $392 million in debt, so it can hold out a while longer even if it continues to lose tens of millions per quarter. There’s almost no reason to think it can reverse course soon, though. So unless a buyer steps up or Elevation Partners throws more cash into this particular money pit, Palm is doomed.

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  1. Its tough for palm, but using the Pre, and comparing it with Nexus / iPhone, I think Palm still has a shot if they get a compelling device out there.

    Palm still has a decent enough OS with a good browser and keyboard that both android or iphone doesn’t have. The Pre is painfully slow, and has a few random bugs which prevents me from recommending it to friends. However, after playing around with the Nexus for a few days, WebOS is a lot more polished than Android.

    I think they need to come up with a device with a ‘wow’ factor.. the Pre just looks cheap and low-end in front of the iPhone or Nexus. It needs to beat the other phones at-least at the basic level: speed and reliability, and needs to do the basic functions well (eg. phone app on Pre is horrible).

    There is enough divergence being caused in the mobile world that if there is a compelling enough device out there, people will buy it.

    Palm has one really thin shot, but its definitely doable.

    1. Yes, I completely agree with your comment. I am a Pre user and to be honest, i dont think any other OS out there can do what WebOS can do and that too very seamlessly.

      From the very starting while using Pre, I thought had this OS been on a device like iphone, or nexus one or HTC HD2 etc where there is more screen area and better camera etc, it would have beaten each and every phone in the market handsdown.

      I have had iphone too, but WebOS, Synergy, Over the Air updates etc, multitasking these things are just phenomenal. I think even though RIM is way ahead of PALM, however PALM truly deserves to be right next to the level of iPhone.

      I truly hope they come up with a better device, not too small like Pre, giving users more screen area and better specs, PALM can make a comeback.

      Lets hope it happens soon..

    2. I think you’re right, too, DD, but I also think even the most compelling device requires a big-budget marketing push. Unless Palm can produce a great gadget and then invest heavily to promote it — or, better yet, convince a carrier partner to do it — its days are numbered.

  2. I picked up a Pre when it first arrived, and my initial question was what do I do? The intuitiveness of the iPhone wasn’t quite there. A message on the device left me trying to retrieve it…

    Palm has some cool web technology. They needed app APIs. The device needed screen real estate. Palm added an ineffective keypad. That last 5 or 10% is always brutal. I wish them luck, but they sadly need more than that in the face of Apple, RIM, Google, Microsoft and Nokia. If there was going to be investment it needed to happen already!

  3. Palm should consider exiting the phone hardware business and focus on making WebOS a niche mobile operating system. They’ll cut their operating overhead substantially, get the design expertise of better phone manufacturers, and expand their share of the mobile operating system market.

    My $.02,

    Best.

    1. first dumb-pipes than dumb-phones. differentiation of cell hardware will be invisible in 5 years. and in the end its all gonna come down to the software.

  4. I still think Cisco should acquire Palm.

    1. I’d buy that for a dollar!
      You’re right, but that would only buy them more time, they need to get their next shot very, very right

  5. Around the time of Pre’s launch March 2009 McNamee of Elevation Partners the investors of Palm said “You know the beautiful thing: June 29, 2009, is the two-year anniversary of the first shipment of the iPhone. Not one of those people will still be using an iPhone a month later.”

    There were a whole bunch of similar moronic statements from Elevation Partners and Palm, with this kind of leadership some people actually thought Palm had a hope in beating Apple?

  6. Palm is all done. They do not have the scale to compete. Like Windows vs MAC redux, it is about scale of apps, ecosystem partners, channels, and cost.

    I think RIM needs to acquire Palm…purely for webOS…the purely evolutionary nature of the last several BlackberryOS upgrades suggests they have an issue with extending the core platform into touch and graphics. Like MSFT recognized with WinMO, they needed to disconnect from that OS and instead work from the Zune OS.

    I’m not intelligent enough to know whether the OS can be merged, or RIM would be better off working from webOS with select BlackberryOS code (e.g. push)

    There are also complementary hardware competencies between the two. Both are targeting the same business/consumer converged device from a HW standpoint, but failing on different elements. RIM on touchscreen, Palm on achieving quality at the right cost/price point.

  7. So much for those who calls it the iPhone killer.

  8. Comments here aside, I don’t know anyone who’s used a Pre that didn’t return it and go back to their iPhone.

    I got fed up with iPhone and Apple and got the Nexus One. I’ve only played with the Pre for a brief period, but it’s not even close to the Nexus One. A toy as far as I could tell.

    Palm was king of the PDA, but their cell offerings are always lacking. I liked my Palm Treo 700p, but in the end, they took too long to get away from PalmOS and into something that could compete with iPhoneOS, Android, or even Symbian. It’s a shame.

  9. I’d say Adobe should acquire Palm and keep FLASH alive on mobile device.

  10. Reading these comments you will think the Nexus One or other Android phones are flying out of stores, but the reality is that they are all dogs just like the Pre and its sister the Pixi. The Nexus One is a dog, so is the Droid, so was the G1 and all others useless Android phones (I cannot remember their names, that is how useless they are). The reality is that outside the iPhone and BlackBerries there are no other smartphones that move similar volumes. No, E71 and E63 from Nokia are not smartphones, they are feature phones.
    Nexus One is even a bigger dog than the Pre, can you believe that?

    1. @rob that’s why the nokia 5800 is one of the most popular phones ever. because it’s a dog right?

      i happen to use this phone and have a flash capable browser, multi-tasking and free sat nav for life, with decent battery life.

      for me personally, nothing compares to this offering in terms of price and scope at the moment.(i’m not bothered about a irrelevant mega pixel cameras)

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