Can Pre Save Palm From Being Put Out to Pasture?

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?

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