Mobile Technology News & Mobile Fun

Analyst roundtable reunion: The last remake of Palm

By Scott M. Fulton, III, Betanews

Though the news is relatively fresh that Palm Inc. has been negotiating with China’s Huawei Technologies about a possible buyout, the word from Investors’ Business Daily sources is that these negotiations have actually been ongoing for at least two months. That nothing has come of them since February may be the most important, and potentially distressing, news of all.

In light of that realization, Palm is suddenly in need of yet another comprehensive makeover to save its flagging image. Suggestions from the field include relatively simple ones from Betanews contributor Carmi Levy — that it should keep its Pre Plus and Pixi Plus hardware, and focus on building up its applications base — and the completely opposite suggestion from widely respected industry analyst Dr. Gerry Purdy, who has published his viewpoints on mobile technologies in what’s now called the MobileTrax newsletter, since 1986.

In a stunner of a report this morning, Dr. Purdy suggested that Palm’s next comeback include dumping its platform’s current form factors, in favor of one with a wider screen and keyboard, and with a very familiar brand:
“Drop Pre. Bring back Treo. It’s a known brand. It represents everything good that Palm did for years to lead the SmartPhone market,” he wrote. “With this branding, we could all then say that the ‘Pre’ was the ‘Precursor’ to the return of Treo. Plus there’s a new definition for the three key service elements in Treo: 1) phone, 2) apps, and 3) services such as social networking.”

Dr. Purdy went on to suggest that Palm partner with a major player in the field, one of Lenovo’s or Motorola’s or Nokia’s standing. Then it could wipe the slate clean for its renewed Treo brand, purge the webOS from its systems, and deploy a remodeled form of MeeGo, the Linux derivative formed from the merger of Intel’s Moblin with Nokia’s maemo. Using that as a launching pad, he suggested Palm then launch an apps store for MeeGo apps to compete against Apple — something which Intel has said MeeGo would permit individual vendors to do.

“There are a lot of excellent assets at Palm. They have a great team (investors, board, management, staff & partners). They have a successful history,” the MobileTrax analyst concluded. “To many, they still represent the notion of ease-of-use that enabled the Treo to succeed so well in the market. These assets need to be preserved before they slip away.”

The precedent for some of what Dr. Purdy suggests was set in September 2005. At that time, in its biggest attempt to date to remake itself and to rediscover relevance against the surge of BlackBerry devices, Palm found a partner in Microsoft. It would build Windows Mobile 5 devices under the Treo brand. Up to that point in time, Treo had been the vehicle for the Palm OS that the company had just sold off to a browser maker in Japan called Access.

On the week of that announcement, I covered the story for Tom’s Hardware with an analysts’ roundup. Anyone who knows that old publication, as well as Betanews, knows all the participants. First to proclaim the imminent death of Palm OS as a result of the Microsoft deal, was a certain Info-Tech Research analyst.

Carmi Levy, September 27, 2005: The most obvious early casualty of the Microsoft/Palm and Intel/RIM announcements is clearly the Palm OS. PalmSource, which stumbled in delivering version 6, now finds itself fighting an uphill battle to convince its former owners — and the mobile/wireless market in general — that Palm OS will remain relevant in the middle of these powerful new hardware/software/carrier alliances. Frankly, I don’t see that happening. The market has already voted with its feet: Palm OS-based devices are in freefall, and the conditions are such that this trend will not be reversed.

Palm OS as we know it is dead. PalmSource has announced plans to base future revisions on a Linux core. While this may help the firm carve out a low-end niche, its long-held hope of appealing to the enterprise market is now history. IT’s needs are being — and will be — nicely met by the remaining players.

Speaking with Betanews today, Carmi essentially said Palm’s problem now is a magnification of Palm’s problem then. The hardware isn’t the tarnished part, but the brand.

“Palm’s salvation will not be new and improved hardware because success in this market is no longer decided by who has the best phone. Palm could introduce the world’s best mobile phone tomorrow and it still wouldn’t change the company’s fate,” Levy told us. “Encouraging the company to built a successor to Apple’s App Store is like telling an on-the-ropes automaker like Chrysler to build a hybrid that delivers better mileage than Toyota’s Prius and a more engaging driving experience than a BMW. Palm can’t simply conjure up a magically successful online app store — indeed, its initial effort has been a dismal failure because developers won’t commit to a platform with a questionable future. Palm is out of options in this regard.”

Disagreeing directly with Carmi in 2005 was none other than Dr. Gerry Purdy, who made the case that selling off PalmSource to Access was necessary for the Palm OS’ survival:

Dr. Gerry Purdy, September 27, 2005: I don’t think that Palm is getting squeezed out. I do think that PalmSource will migrate itself to become a value added services layer on top of Linux which will become the dominant OS in the 3G phone market. What happened is that the OS has become less relevant in the wireless handheld world but value added services has become more valuable. It was actually very wise for PalmSource to acquire China MobileSoft as that gets them into the Linux game and then Access was smart to buy PalmSource because it allows their browser technology to expand outside of Japan into the Linux world as well.

What does all this mean? I think you’ll see Palm become a major handset manufacturer in the wireless handheld space using Access as their supplier of Linux and the value added services (such as user interface, core applications, file management system, Web access browser, content delivery, etc.) for their broad 3G offerings that will work on multiple carriers.

Next: Ross Rubin weighs in…and where was Joe?

Warning us in 2005 that the problem before PalmSource was distinguishing Palm OS from being just “good enough” to being outstanding, in the face of new competition from the Treo, was a certain Jupiter Research analyst:

Joe Wilcox, September 27, 2005: I wouldn’t say the Treo is exceptional, but it crosses the “good enough” threshold for many people. Another distinguishing feature is the PalmSource software. It’s a different operating system than some of the Windows stuff out there — looks different, feels different. Now we have this Palm device running Windows Mobile software, and there are going to be a lot of devices out there running Windows Mobile software, and as we saw in the Windows space, as demonstrated [there], we may see greater difficulty to differentiate over time.

Most of the devices that Palm ships run PalmSource software. So I think it would be way, way premature to write PalmSource off here. These two companies were one at one time, and they have a long-standing relationship. Just the fact that the Windows Mobile was announced for one device says something about the extent of the commitment. Yes, Palm is licensing Windows Mobile, but it’s toe-in-the-water stuff. PalmSource has a whole leg in the water, at least. PalmSource has to make its future clearer now. We just had the acquisition, and then right afterwards, we had the major partner going with a rival’s software. So it’s now up to PalmSource to really articulate a clear road map for its products, and to begin delivering on some new capabilities as soon as possible. At the least, it wants to hold on to its major licensee, and in the best-case scenario, extend its software to other devices.

Writing for us a few weeks ago, Wilcox suggested the first layer of Palm’s problem is one of perception — a kind of self-fulfilling prophecy that keeps folks from investing in the platform because so many other analysts suggest it’s not worth investing in.

“There could be more positive perceptions about Palm, if anyone really looked,” Wilcox wrote. “WebOS is simply one of the best smartphone operating systems ever developed. Palm marketing is aggressive and compelling. Then there are the carrier deals, which keep coming with the bad news. Today, Palm announced that AT&T will distribute Palm Pre and Pixi. That puts three of the four major US carriers in Palm’s palm. But who is going to buy a Palm smartphone with all the negative crap being said about the company’s future? Who wants to buy a product today from a company that might not be around tomorrow?”

Forseeing a convergence in mobile phone operating systems around Linux — or perhaps an emerging brand in the Linux space — was NPD analyst Ross Rubin, now the company’s executive director of industry analysis for consumer technology. In 2005, Rubin suggested that brands start finding ways to distinguish themselves through applications and functionality, to introduce themselves to the consumer as something of unique value in themselves, as an alternative to dumping themselves onto a collective platform as PC manufacturers did in the 1990s.

Ross Rubin, September 27, 2005: Having Windows Mobile is probably of more interest to enterprises than consumers, but unless there are other benefits that come with that, such as greater stability. I think the difference is getting back to this set of capabilities that many of these operating systems can provide. Unlike in the PC world, where you really had Office driving a lot of Windows sales, because those are the applications people wanted to use, you haven’t really gotten that “killer app” for cell phones. To the extent that there are compelling applications, there are a number of ways that those could be brought to the platform. It’s not as simple as just having an application on top of an operating system. In the PC world, you have things like Brew, Java. New applications could be delivered over the air. So in some ways, it’s a more dynamic environment where the operating system and the application are not as strongly tied together in the real world as they are on the desktop.

Carriers have a vested interest in having a broad portfolio of handsets, with different features. I think also that the nature of mobile phones is that they’re more personal than a lot of PC devices are, and again, why do we purchase PCs? It’s really to run different applications…I think one way of looking at it is, maybe the best comparison is not necessarily to the PC itself, which has a certain set of features driven by volume in the marketplace, that certain components tend to win out, but really more sort of like the Web. No two Web experiences are really identical. No two Web sites are really identical. I think in many ways, what carriers are looking to do is take that kind of diversity and make it available to consumers through different kinds of applications, and optimizing different kinds of handsets. Carriers certainly have an interest in keeping healthy competition alive among different handset manufacturers.

Speaking with Betanews today, Rubin said much the same thing: He believes the task before Palm is to continue to distinguish itself, to define a clear set of functions and actions that define what a consumer can do with a Palm phone — to brand the function, not just the device.

Responding to Dr. Purdy’s suggestion this morning, Rubin told Betanews, “Yes, Palm could do any number of things to improve the product; a larger screen device would help show off webOS, but the company instead chose to go for a smaller, more comfortable device with a Zen aesthetic resulting in greater differentiation. Palm’s enemy is not so much Apple, Google, or Microsoft as it is the clock. As [Palm CEO] Jon Rubinstein has noted, the company needs to reach the scale of large manufacturers to achieve ultimate profitability. It is launching now on multiple carriers, which will help deliver scale, but it is not happening fast enough. This is why so many of the rumored acquirers are large-scale manufacturers — either in the handset space such as Motorola, RIM, Nokia, or HTC, or primarily outside (Lenovo and Dell). Making changes such as merging webOS with MeeGo — itself a recently merged operating system with very low volume — would require a luxury of time and attention Palm doesn’t have at the moment.”

And responding to my contention that perhaps Sprint may not have been the optimum platform, from a consumer standpoint, on which to launch the new Pre in 2009, Rubin said, “There’s little use to Palm in looking back at Sprint in hindsight. Palm played the best hand available to it, and Sprint did support the Pre with extensive promotion. It now has its handsets on the top three of four carriers in the US as well as in Europe, and needs to educate and explain its advantages to the consumer while continuing to court the developer.”

Copyright Betanews, Inc. 2010

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