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Not All is Well in Smartphone Land March 21, 2010

Posted by Peter Varhol in Software platforms, Strategy.
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I’ve always believed that history has something to say to us, if we listen with an open mind.  The company once and presently known as Palm appears to be on the ropes, with Wall Street analysts establishing a target price for the stock at zero.  That’s right, there are those on Wall Street who believe that Palm must either sell itself off or close its doors in the next year.

I have a bit of a personal interest here, in that former colleagues and well-known Web developers Ben Galbraith and Dion Almaer last fall left the Mozilla Foundation and went to work for Palm as directors of developer evangelism.  In retrospect, it doesn’t sound like a very promising career move.

And Palm has a bit of history, as the first (and possibly only) real success in the personal digital assistant (PDA) market, with the Palm Pilot and Palm III.

But even at that time the company was in flux; it was acquired and divested more times than a holiday fruitcake.  While that couldn’t have helped its business stability, it probably isn’t entirely to blame for the straits the company is in today.

And despite two PDA/phone operating systems – PalmOS and webos (Palm also used Windows Mobile in one of the Treo models) – it doesn’t look like it’s going to successfully make the transition to a successful smartphone company.

I don’t have particular loyalty or affinity to Palm or any smartphone company, for that matter, but I’m always curious as to why a once-successful company fails.  In Palm’s case, my take would normally be that the company was a classic one-trick pony.  It knew how to produce a winning PDA, but that may actually have been a hindrance in making a spiffy phone.

The Palm Pre smartphone, released in the middle of 2009, was well-received, so perhaps this pony knows multiple tricks.  Wall Street claims that the company didn’t spend enough on marketing initially, and the phone carriers didn’t promote it sufficiently.

It may in fact be a matter of marketing, but probably not of the advertising type.  There are plenty of phone manufacturers with less pizzazz or hype that are successful nonetheless.  What Palm lacked was the ability to create demand for the Pre.  While those I know who have tried it have been impressed, there are very few that have done so.  The company has failed to make people curious.  It doesn’t matter what carrier you use, but you have to establish a direct connection between the phone and the user, and Palm has not.  And incidentally, Walt Mossberg said that “I consider the Pre to be potentially the strongest rival to the iPhone to date, provided it attracts lots of third-party apps, which it sorely lacks at launch.”  Since September, Ben and Dion were supposed to be recruiting developers.

It’s regrettable, because it appears that Palm has succeeded in growing out of its PDA culture and into a phone culture.  It seems to be an example of how you can do everything right, yet still come out on the wrong side of the ledger.

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