Palm is Back! Not Yet But They’re on the Right Track

Summary

Palm’s new Pre device, along with its webOS software, gives the company its best (and maybe last) chance to survive and regain significant presence in a category it defined and once dominated.

Analysis

Palm was an innovator in the consumer electronic and mobile markets with its iconic Palm Pilot, Handspring (the founders left Palm and then sold the company back to Palm) and Palm Treo devices.  Palm practically invented the PDA and smartphone categories yet has fallen on hard times the last several years as newcomers like HTC and Apple and incumbents such as Research in Motion, Nokia, LG and Samsung have all captured a share of the burgeoning smartphone market.  Palm also stumbled with their operating system (OS) strategy and execution, including an OS company spinoff and then licensing back the software.  Just as important, Palm helped create a significant worldwide developer community.  They inspired a large and eager collection of developers who have turned to creating applications for the more popular Apple iPhone and RIM Blackberry products the last few years.

 

After several attempts, Palm is back with its latest (and maybe last) attempt at getting back on track.  Its Palm Pre (with webOS software) is a strong return to relevance in the smartphone segment.  The product has some innovative features, including a compelling slider design with a fresh playing-card-like user interface.  The crown jewel may be the Linux-based webOS operating system, which tries to bring PIM (Personal Identity Management), social networking and Web 2.0 elements together by unifying contact and personal information across various sources.

 

While the company has plenty riding on the Pre (maybe the fate of the company), the market should not judge the Pre’s success solely on the Sprint launch.  The device is in limited supply (which might help foster demand), Sprint has a checkered recent history with device launches as well as customer satisfaction, and the ultimate success or failure will be determined by additional US mobile operator deployments as well as global adoption.  Pricing will also be an issue as Apple just announced that its upgraded iPhone, the 3G S - with faster speed, increased memory and improved software, will be available starting at $199, the same price as the Pre on Sprint’s network.

 

Palm is moving in the right direction with the Pre and webOS.  Palm should continue developing and touting webOS capabilities as this is a key long-term differentiator, though the competition is surely incorporating similar features in their products.  If Palm can have a successful phase two of its rollout that includes international expansion and major US operator addition(s) while maintaining its margins and enough cash to operate, we might just have another (returning) viable competitor in the growing smartphone market.