What Does Palm Do When Nobody Wants Its Products?

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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Image courtesy Flickr user cmiked

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