Skip to main content

Palm Joins ICU Ward, Looks for Savior

Last year, Palm thought it had all the pieces for a turnaround in the market it pioneered: A new CEO known for making the iPod a household name, a sleek new smart phone called the Pre and fresh, intuitive operating software.

Instead, the company is in danger of going the way of its 1990s Palm Pilot, making it the latest innovator to learn that great technology and an accomplished leader don’t guarantee success.

Several analysts say Palm Inc. might not remain an independent phone maker for more than a year or two. It just could be too late to stop the momentum enjoyed by Apple Inc.’s iPhone and Research In Motion Ltd.’s BlackBerrys — not to mention a growing crop of phones running Google Inc.’s Android software.

Palm spokesman Derick Mains said the company had no comment.

Consumers have gravitated toward smart phones for their versatile features, such as Internet access and applications that can be downloaded. One out of six U.S. adults had a smart phone last year, according to Forrester Research.

But Palm — a leader in the early days of handheld computing — was slow to adapt. It began fighting back in earnest in January 2009 at the International Consumer Electronics Show. It unveiled the stylish touch-screen Pre and webOS, software that allows Palm phones to do something the iPhone can’t — run multiple apps simultaneously.

Ed Colligan, who was then Palm’s CEO, said at the time that the new products somewhat marked a relaunching of Palm itself. But it hasn’t gone as smoothly as Palm hoped.

Palm released the Pre last June, for use on Sprint Nextel Corp.’s wireless network, and followed it in November with a cheaper model, the Pixi. Verizon Wireless started selling upgraded models of these phones in January, and AT&T Inc. plans to offer webOS phones later this year.

Despite widespread availability and positive reviews, consumers haven’t really embraced the products. Palm sold 810,000 phones in the quarter that ended Aug. 28. In the next quarter, sales fell to 573,000. And Palm’s latest report, due March 18, is not expected to be bright. Palm recently cut its forecast for that period, citing sluggish sales.

Discouraged investors have sliced the company’s stock price by more than half since the Pre hit stores. In that same time, shares of Apple have risen nearly 50 percent to all-time highs, while RIM shares have fallen 11 percent.

One big problem for Palm is standing out in a crowded market dominated by Apple and RIM. Many analysts believe Palm’s latest products are good, but the company simply hasn’t been able to make potential customers realize this.

Not for a lack of trying: Palm spent $74.1 million on sales and marketing in its last reported quarter, up 64 percent from the previous year.

Verizon and Sprint have advertised the Pre and Pixi, too, but now probably aren’t doing it as aggressively as they would if they had the phones exclusively.

On Palm’s end, at least, the marketing push is likely to last for several more quarters as it tries to connect with consumers, said Deutsche Bank analyst Jonathan Goldberg.

For a larger phone maker such as Motorola Inc., in the midst of its own comeback attempt, an advertising blitz might not be such a big deal. But Palm is much tinier than its key competitors. It takes Palm an entire quarter to sell as many phones as Apple sells in a less than a week. RIM spent six times as much on a category it calls selling, marketing and administrative expenses in its last quarter as Palm spent on sales and marketing.

One thing Palm has: a CEO who helped make Apple what it is.

Right before the Pre launch, Colligan was replaced by Jon Rubinstein, 53, who spent a decade at Apple during its own comeback run. He started in 1997 and was a pivotal figure behind the brightly colored iMac computers and the iPod.

He came to Palm in 2007 as executive chairman under a deal in which Palm sold nearly a third of the company to private equity firm Elevation Partners.

Still, even the most astute leadership isn’t enough in such a competitive market, Canaccord Adams analyst Peter Misek said.

“It takes distribution, it takes cash, it takes luck. It takes a lot of things, and if all those things don’t click your probability of success is low,” he said.

It also takes time. And Palm wasted it during many years of corporate restructuring, according to Donna Dubinsky, a former Palm CEO and board member.

Dubinsky and Jeff Hawkins founded Palm in 1992, and in 1995 it was bought by U.S. Robotics, a modem maker that was acquired by 3Com Corp. in 1997. Palm spun off as its own company in 2000, two years after Dubinsky and Hawkins left to form a rival startup, Handspring, that made influential early smart phones. In 2003, Palm acquired Handspring and spun off PalmSource, which made the PalmOS handheld computing software, as an independently traded company. PalmSource was bought by Japan’s Access Co. in 2005.

Dubinsky said all the shuffling took “critical resources and attention from product development.” And even though it happened years ago, she called the decision to spin off PalmOS a “huge strategic error.”

“As RIM, Apple and Palm all have demonstrated, these devices need to be highly integrated hardware and software developments in order to optimize the user experience,” Dubinsky wrote in an e-mail to The Associated Press. “When Palm no longer could advance the OS, and had to create a new one, it lost several years.”

So what will happen to Palm now?

Misek thinks the company could keep spending its cash — it had $590 million at the end of its most recently reported quarter — and run out of gas in a year or two. Or, it could try to conserve funds and angle to be bought out. But Misek thinks a buyer could be dissuaded by the year or two it might take to get webOS working on new phones.

Kaufman Bros. analyst Shaw Wu thinks Palm could be purchased in the next year by a company such as Motorola or Dell Inc. That would give those companies their own smart-phone software rather than making them rely on software found on many kinds of devices.

In fact, Wu said, Palm’s best asset is its intellectual property. Palm has patents on its own style of the touch-screen technology that Apple popularized and is now suing phone maker HTC Corp. over.

Ultimately, Wu thinks the smart phone market will look like the PC market, which was crowded with competition early on but eventually produced a short list of winners and a smattering of losers.

“Palm’s almost on that list of losers,” he said.

Editors' Recommendations

Ian Bell
I work with the best people in the world and get paid to play with gadgets. What's not to like?
How to use iMessage on an Android phone or tablet
iMessage on an iPhone 14 Pro Max, plus iMessage on an Android phone using the Beeper app.

One of the big draws of iPhone and Mac is the iMessage software. This texting app makes it easy to stay connected to friends and family, and many users point to it as a key reason they stay within the Apple ecosystem – venture off to Android, and you'll be stuck with third-party apps or standard text chats.

However, that's not actually the case anymore. While Apple's iMessage software is exclusive to iOS and you won't find it in the Google Play Store, a new app called Beeper lets you access the iMessage platform. The universal chat app works with a variety of texting software beyond iMessage, making it a one-stop-shop for all your communication needs.

Read more
10 iPhone productivity apps you need to download right now
iPhone 14 Pro showing the Moon always-on screen, held in a man's hand.

If you're anything like us, your Apple iPhone is a beast with multiple uses. It can go from an email-firing machine to a dedicated Netflix device in seconds and then into playing video games just as fast. But just because it can do all of those things doesn't mean it couldn't stand a little fine-tuning when it comes to optimizing it for productivity.

"Productivity" can mean a lot of things, whether it's sending emails, making tweaks to documents and spreadsheets, or just planning for your day ahead. Whatever being productive means to you, there are apps that will make it easier. Here are 10 iPhone productivity apps you need to download today.
Todoist
The best to-do app

Read more
Best iPhone 15 deals: How to get Apple’s latest iPhone for free
The display on a green iPhone 15.

The iPhone 15 is Apple’s current flagship phone, and it’s also one of its most popular phones. It’s come storming out of the gate since its release and has skyrocketed to make our ranks of the best phones. Its popularity can make it difficult to find iPhone 15 deals, but there are some out there. We’ve rounded up the best iPhone 15 deals going on right now, and while most of them entail trading in a device for savings, trade-in value is very high and could land you a free iPhone 15 if you’re trading in the right device. We’ve got all of those details below, so read onward and start saving on a new Apple iPhone 15.
Today's best iPhone 15 deals

: Get up to $830 in savings when you trade in a similar device. Also included is 3 free months of Apple TV+, Apple Fitness+, Apple Music, and 4 free months of Apple Arcade.
: Save up to $830 with device trade-in and inclusion of Verizon Unlimited Plus or Unlimited Ultimate plans.
: Save up to $830 via 24 monthly bill credits when you add a line on a qualifying plan and trade in an eligible device.
: Save up to $700 when you trade in an eligible device and commit to an AT&T Unlimited plan of more than $76 per month.

Read more