What Palm Needs to Do to Bounce Back

51 Comments

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 (s rimm) 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 (s 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 (s T) 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 (s VZ) is going to start supporting the Pre as well. With Sprint (s S) 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 (s NOK) 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.

51 Comments

John Miller

Whats so difficult or as the writer puts it complex about using the Palm Pre? Which Handspring legacy? Mentioning the BB as device of choice makes me wonder even more about the complexity statement; just a very simple and badly researched article.

Sam

That for example is precisely why ditching the keyboard would be a big mistake. If you want to argue they need an even better keyboard, that is one thing. But no keyboard at all means dramatically reduced input capability.

Sam

Paradoxical that in one breath the article demands that Palm SHOULD NOT copying Apple’s PR strategy and in the previous breath was demanding that Palm SHOULD copy Apple’s design strategy with a plain phone that has NO buttons.

Wrong, wrong, wrong. That space is already filled. And it has weaknesses anyway. Lack of buttons makes the iphone navigation and data entry tedious. Capacitive screen is cute but it needs to be supplemented with navigation aid and quick-access buttons. The quick access buttons are even more important in a device that can actually multitask.

So aping the iphone would be a poor decision. Palm is dealing with a device that needs buttons and can take advantage of them.

Better for Palm to keep the buttons and focus on those who are dissatisfied with their HTC, Nokia or Blackberry smartphone. And new smartphone buyers who are less focused on fashion and more on functionality and ease of use.

Sivan

Om, the key is to understand why you stopped using it.

WebOS is pretty but slow and laggy, and combined with the need to slide out the keyboard, the entire experience is far from the rapid fire BlackBerry.

The coverage of toy devices like the iPhone and Nexus One shows that tech journalism is easily taken in by bells and whistles. Palm seems to confuse impressing this crowd with actual functionality.

Om Malik

I think my decision to use Blackberry is completely because i prefer BB as i email a lot and I do google talk on it, plus text messaging. It is a simple enough for me to focus on typing. i carry an iphone with a sprint MiFi to do web surfing on the go.

Vipul Vyas

Looks like carrying a Verizon Pre would reduce you down to just one device. Apparently, the new Verizon Pre acts as a MiFi device as well.

gbp

See you can’t do web surfing on the BB. But you are willing to live with it for the simple reason that it has a better keyboard.

I guess Verizon will solve your problem of carrying BB and iPhone. The Pre’s browser is on par with iPhone and it has a keyboard. You can also use it as a modem. Best thing , you never will drop a call ever.

Om Malik

I guess you will never understand my problem: I have more than 1500 emails a day and close to 100 txt messages. For me the only device that do the job is Bberry. I am sorry, but Palm’s keyboard sucks and so does the email client when you has a massive email load like I do.

It will be difficult to replace BB for me.

Vipul Vyas

Om- with multiple email addresses, I’ve found that the Pre does a pretty good job helping managing through them. I like the consolidated email (multi-account) view and deep folder integration that lets me drill down to archived emails with just a few navigation steps. I do agree that the BB is better and love the fact that the phone stays charged for days. But compared to both Android and iPhone, webOS’s email management seems superior. Yes, the keyboard stinks but most seem to have accommodated themselves to it. I prefer it to the blackberry’s because it’s actually tighter and there is less space to travel between keys so I can go faster. I basically type with my thumbnails. Now, changing how you behave to fit your phone isn’t great, but it does work. The Pixi keyboard is actually almost as usable as the blackberry’s in my opinion. For quick stuff I use the Pre’s virtual keyboard (available free via preware). However, for more involved stuff, I still go to the physical one…especially if I am walking around when typing. Again, I’m just struggling to understand the gripes so I have a better sense of whether I should recommend the phone or not. I’ve had few problems with it. I like the portrait slider because it enables me to type with one hand. Also, I can type while I drive as illegal as that might be.

gbp

OM, That is great input to PALM.
PALM can have a true winner from the serious BB fans if they can
Widen the pixi by an inch,
Replace the keyboard with a BB type keyboard,
Replace the pixi processor with Pre’s processor,
Bump up the internal memory to 16Gig,
and
Add an expandable SD slot.
That would seriously hurt RIMM.

I hope they reach out to you.

Sivan

WRT web browsing on the BlackBerry, I found that latest Opera Mini 5 works great on the 9700.

It’s a very competitive mobile browser that makes browsing on a BlackBerry totally practical even with the smaller screen. The BB browsing “problem” can be put to rest.

Vipul Vyas

Leaked images of the Verizon version of the Pre show absolutely zero buttons on the face of the phone. With the preware virtual keyboard, this thing looks like a piece of smooth obsidian. I have absolutely no idea what Om is talking about at this point.

Vipul Vyas

I’m terribly confused by this post. I agree with Om in that Palm has:

  1. Probably not managed press relations well given that he hasn’t touched the Pre in a long time – they’ve got to motivate thought leaders to keep thinking about Palm.
  2. Had a lousy launch marketing program with the albino woman that scared everyone away.
  3. Tried to sell into a declining market represented by the Sprint base – especially since Sprint is losing a lot of high value subscribers that would be the target market for the Pre.

Om’s comments regarding Palm’s business failings and poor marketing execution in the face of deep-pocketed giants makes sense and is insightful. But that being said, some of Om’s comments regarding the physical characteristics of the devices suggest that this post is a bit knee jerk anti-Palm without really looking at some of the basic facts.

I could totally understand comments like the build feels cheap and plasticky, the slider seems loose and not secure, the Pixi seems slow etc. Those are all somewhat objective observations shared by others. However, Om’s observations about too many buttons seems to be an attempt to just throw some anti-Palm justification out there. I use both an HTC Hero and a Palm Pre. On the Pre I have installed the Preware virtual keyboard and use the physical one only when I walk and text at the same time. It’s useful in those scenarios which are not infrequent.

I just don’t understand Om’s comments on the physical layout issues. On the Pixi (which I bought for my wife to supplement her iPhone), I have not problem using the keyboard.

Again, Om may have some solid points on the physical elements of the Palm line up, but I just don’t understand the post at this point given my experience with the products.

gbp

Contrary to the public opinion of the cheap hardware (plastic), the Pre is a solid phone. Folks dropped it on hard surfaces (concrete, marble..) except few scratches nothing happened to the phone. The phone just works.
PALM is friendly with some folks , not with all.
I hope they will be friendly to OM and provide some insight into their future.

Jason Lackey

Less complex hardware? Don’t think so. Less crappy? Yes! How about decent battery life, GSM roaming on CDMA devices, removable SD memory and a keyboard that doesn’t have a gritty shitty plasticy feel to the slide? I also think that the Pixi was a mistake, instead of launching a gimped, hobbled little turd they should have launched a new higher spec device with a bigger, higher resolution screen that would have really shown off WebOS. With a new higher end device in the lineup, the Pre could take the low end and when thrown up against the midrange featurephones it would be competing with, it would be sweet indeed. The Pixi has done nothing to build the cache of the WebOS platform for 2010, but might have been nice going up against things like the HTC Excalibur in 2007. I hope these guys can make it, WebOS is beautiful to look at and pleasant to use and is a worthy competitor to iPhone, Android, Maemo or anything else out there.

gbp

Om,
Baring the balance sheet issue, I cannot agree with you on PALM.
For once PALM is the hip brand again, it is yet to reach the mainstream customer. Regarding deep pocketed competitors, well nimble is the way to churn out new software and phones. Besides the deep pocketed competitors are preoccupied with other stuff, Google has other things like , search, wave …. while APPLE makes computers and music players too. For PALM the only thing they do is Mobile. And they are good at it.

The ecosystem and apps take time to reach the 10K mark. It just takes time. So be patient. I remember how folks wrote about a paltry “30” apps in June , now they crossed 1000. Plus they made improvements to SDK.

And the last point is , there is nothing wrong with being secretive about your products and such. I cannot comment on why they are not talking to you. We are mere readers on this site. Obviously there might be a reasons.
May be you are paying the price for bashing them last year :).
With Verizon and ATT selling their phone , balance sheet can only grow.

Jeffrey McManus

Sorry, but the keyboard on the Pre is a key competitive differentiator, not a vestige of the device’s legacy. There are lots of people (like me, as well most Blackberry users) who have come to prefer a hardware keyboard and won’t buy an iPhone because it doesn’t have one. It may smart for Palm to position its devices as a trade-up from Blackberry rather than a competitor to iPhone, at least in the short term.

Having a good application ecosystem is the product of three or four good strategic decisions and hundreds of good tactical decisions. A good strategy seems to be in place, but I don’t see the execution.

Om Malik

Jeff

How is that key differentiator working out. And I think Pre’s keyboard is actually lousy. I was trying to stay positive about things here in this post. I think the company has issues — and hardware complexity and lack of apps is at the heart of it.

Jeffrey McManus

The keyboard is working out fine for me. For people who can’t do without a hardware keyboard I would argue that it’s good enough. Since iPhone doesn’t even have a substandard hardware keyboard it’s a competitive differentiator for them.

Definitely agree with you on the apps front, though, it’s their biggest challenge and the one that Palm has proven least qualified to execute on. They need to change the game here and the decisions they’ve made to date haven’t cut it.

Vipul Vyas

After reading this piece, I was scratching my head wondering which phone Om had actually used. A Treo 650? If you look at even the new Pre for Verizon they’ve even gotten rid of the single button that exists on the face of the Pre. Having tried all the OS offerings out there, I would say that webOS is more intuitive (by leaps and bounds) than Android. I cover political bias in the media professionally. Interestingly, I’ve observed similar bias in the tech/trade media (no surprises there). The level of giddiness over Android that Om and many others express is a bit out of synch with the actual goods being delivered by the OS experience. I would agree that the market potential of Android is huge given who is involved and backing it. But, from a pure “what is technically interesting/superior,” all the negative Palm sentiment here on GigaOM seems more baggage than true analysis.

The commentary on “too many buttons” made me wonder if I had misread the article or if Om had picked up the wrong phone. At this point, the Pre has one less button than even the iPhone. Seems like Android may be getting the “pre-Iraq war coverage” and hype right now while superior alternatives are being bypassed because it’s just not cool to talk about them.

Fisal

I can’t disagree with you more on the “less complex hardware point”, there are no multiple buttons on the pre.. even the only button that was there got removed on the Pixi! Palm’s latest devices offer the perfect balance between touch interaction and QWERTY.

Om Malik

Fisal

I think there are two kind of smartphones: touch and keyboard. Doing one thing well is good — I think the multiple options only confuse people. Blackberry/iPhone: Good examples of what I talk about when I say focus.

But looks like you and I are not going to agree on this anyway :-)

Still friends I hope

varun

Excellent and well thought out article. I’m not convinced that there’s too much hardware complexity, except to say that perhaps there is no market for the Pixi. By the time Palm had released the Pixi, the Pre was down to the same price (give or take $10). As to the multitude of input options – I’m not convinced that there’s a compelling case for either physical or virtual keyboard at the expense of the other. If you remember when the G1 first came out, many sites (including this one!) bemoaned the lack of an onscreen keyboard. What Palm does need is a slightly better physical keyboard – steal the one that Nokia puts on the E72!

I absolutely agree that high-end modern phones will live and die on their app support – witness the looming death of Nokia’s high-end! Palm needs to reach out to certain key developers (games, productivity, social networking developers, say) and get them onboard at any cost, including preview hardware, upfront cash, or what have you.

I have to say that as an owner of a 3GS, I do find myself lusting for a WebOS powered device. The ease of use, the attention to detail and, hell, the entire metaphor of cards – the first truly revolutionary and useful development in mobile UI for a very long time – is truly amazing. The Pre was a decent, if incomplete, gen 1 device. Like the iPhone with iPhone OS 1.0, I can understand it’s going to take some time to get up to speed. I realize it’s unfortunate if your competitors have a multi-year head start to need that time, but I understand. That said, what Palm is offering is truly revolutionary software-wise, and I look forward to a gen 2 device that fixes some of the major issues of the Pre (RAM!) in the near future.

kilari

you know. I’m fine with Palm being an underdog. I love my Pixi and I’m happy not having the most popular phone out there. I’ve never been one to follow the crowd. Either way I don’t forsee Palm going out of business cus even with a small 5% market share they should stay alive. They might not thrive, but they’ve not beein striving for a long time. The one thing I do believe would save their company tho would be a hardware assault with different formfactors every quarter. First I’d come out with a slab like device like the HD2, then I’d do a sideways slider for the huge fingered demographic, then a larger Pixi with larger screen and a more Treo like keyboard. Then go back to square one and revise the Pre, then Pixi, then HD2 knockoff. Just keep the hardware evolving. I think options would lead to more customers. Cus the OS is the best I’ve used, and I own a G1, and have used iphone, winmo and blackberry. All inferior. Make me a 4+” screened device Palm please!

gbp

You spoke my mind.
Once you use the Pre going back to HERO,BB and iPhone is going back to the 80s.
I accidentally swiped on iPhone and Hero after getting used to the gestures on the Pre.

I will put a deposit today if PALM makes a device with HD2 form factor.

Eric Risley

Om, thanks for getting us away from the hype and focus of the nanosecond and bringing us a substantive and thoughtful assessment that gets us to think a bit more deeply as well.

Rob Adler

What a difference a year makes. At CES 2009, everyone wanted to get their hands on the Pre. This year, not so much.

Jason

“In the second quarter of its fiscal 2010 period, the company shipped 787,000 smartphones, in line with what Wall Street was expecting..”

2010 or 2009?

Adnan

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.

Om Malik

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.

Brian

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

HT

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.

YUvamani

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.

Om Malik

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.

Mike Cerm

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.

Darwin

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.

Parkite

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.

Paul

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?

Nicholas

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!

R Paul Singh

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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