Palm's Revenue Collapses

[Vincent Ferrari]

<div class='os_post_top_link'><a href='http://www.reuters.com/article/marketsNews/idCAN1944951920090319?rpc=44' target='_blank'>http://www.reuters.com/article/mark...20090319?rpc=44</a><br /><br /></div><p><em>"Palm Inc (PALM.O) on Thursday said its upcoming Pre phone needs "more polishing" but that it was on track to start selling the high profit device in the first half of the year as it looks to grab back smartphone business from rivals. The company gave the update while it reported a wider loss and revenue that fell 70 percent from a year ago, in line with its recent warning for a weak fiscal third quarter. Its shares fell 4.7 percent after the report as some investors may have hoped for a specific launch date for Pre. The Pre is seen as Palm's best hope to fight rivals such as Apple Inc (AAPL.O) and Research In Motion (RIM.TO), which have hurt Palm's smartphone sales in recent years. It said it is working hard to have Pre ready for a launch before the middle of the year at its exclusive U.S. carrier partner Sprint Nextel (S.N). "There's no showstoppers," said Chief Executive Ed Colligan in a call with analysts. "We plan on delivering on the time frame we said we would."</em></p><p><img src="http://images.thoughtsmedia.com/resizer/thumbs/size/600/at/auto/1237551698.usr18053.jpg" style="border: 1px solid #d2d2bb;" /></p><p>My apologies for the long quote, but I wanted you all to get a perspective on the kinds of issues Palm is facing because they announced the Pre so far ahead of when it would actually be ready for launch.&nbsp; I have serious doubts, considering how Palm has continued to falter in recent weeks financially, that even the Pre can drag them up out of the basement.&nbsp; It's being launched only on one carrier that has exclusivity, mediocre coverage outside of major metro areas, and a history of awful customer service.&nbsp; That's a lot of pressure.</p><p>And before you compare that launch situation to the iPhone's in 2007, remember that the iPhone wasn't necessarily the future of Apple, and if the iPhone failed, Apple was in no danger of going out of business.&nbsp; The Pre?&nbsp; Well, I think that's a different story altogether.</p>

[Jason Dunn]

It's being launched only on one carrier that has exclusivity, mediocre coverage outside of major metro areas, and a history of awful customer service.

That sounds exactly like you're describing AT&T and the iPhone. :D

[Tim Williamson]

What's the advantage to launching exclusively on 1 carrier? Does the carrier pay licensing to Palm/Apple so they get revenue up front?

I'm really happy with my iPhone, and am also not willing to switch from T-Mobile because I've had good luck with them in the service and support departments. Plus no one can compete with the cost of their plans.

But if the Pre could be used on T-Mo, I would consider it because it seems like an innovative phone, but since it's exclusive to Sprint, then there's no chance I would even consider the Pre. I'm not switching carriers just to get a specific phone.

[Jason Dunn]

What's the advantage to launching exclusively on 1 carrier? Does the carrier pay licensing to Palm/Apple so they get revenue up front?

It's probably more a matter of marketing/promotion stuff, and possibly the carrier giving Palm a monthly payment like AT&T did for Apple.

[Tim Williamson]

It's probably more a matter of marketing/promotion stuff, and possibly the carrier giving Palm a monthly payment like AT&T did for Apple.

Makes sense, but is kind of short-sighted of Palm. Although, I guess this strategy worked with Apple, but Apple had a TON more hype and positive product recognition before the iPhone. Palm will have to really work to earn back their positive reputation, and I don't know if going with Sprint is the way to accomplish this lol.

[Janak Parekh]

It's probably more a matter of marketing/promotion stuff, and possibly the carrier giving Palm a monthly payment like AT&T did for Apple. Several points:

1. True, but AT&T no longer pays Apple since the iPhone 3G (where Apple has gone back to a traditional carrier-subsidy model).

2. In the iPhone's case, it's also worth pointing out that Visual Voicemail required carrier cooperation. (On the other hand, not all iPhone 3G carriers support Visual Voicemail, so Apple also backed off on this requirement to go global.)

3. AT&T is a significantly larger carrier than Sprint with greater footprint. They're also GSM/GPRS/EDGE/HSDPA, so one iPhone model can scale globally. Sprint, of course, is CDMA 1xEVDO, so Palm has to manufacture and support two different devices.

4. Vinny's last paragraph is worth repeating here. Apple could afford to take the exclusivity risk. Palm has much a smaller margin in which to succeed. (I hope they do.)

--janak

[Jason Dunn]

Makes sense, but is kind of short-sighted of Palm. Although, I guess this strategy worked with Apple, but Apple had a TON more hype and positive product recognition before the iPhone. Palm will have to really work to earn back their positive reputation, and I don't know if going with Sprint is the way to accomplish this lol.

But what makes you think that Palm had any choice in the matter? For all we know, Palm went around begging for someone to take their product, and Spring said "Sure, we'll take it, but we want the exclusive". Remember that Palm hasn't had a winning device in a long while, and while geeks are excited about the Pre, it's entirely possible Sprint didn't realize the potential of what they were getting...

[Jason Dunn]

1. True, but AT&T no longer pays Apple since the iPhone 3G (where Apple has gone back to a traditional carrier-subsidy model).

That's why I said "did" not "does". Past tense. There was certainly more hype around the iPhone than around the Pre (by a factor of 10x at least), so I imagine that's why AT&T was willing to give Apple big $$$ to get it. Is the same true of Sprint? Possibly...hopefully we'll see some details in the coming months about what each of them are getting from this.

[Phillip Dyson]

I think the early Pre annoucement was an attempt to get some cash from investors. And if I remember correctly it did. Surely the Pre may not be enough to save them, but with out those investors it may have been a wrap before the Pre ever arrived.

I think the Pre is a Palm "hail mary". But it just might make it into the in zone.

[treynolds]

I think it's just another sad indicator of the fall of a once great company. Palm made the decision to ax the Foleo and all other PDA's in favor of smartphones, when carriers have limited ability (or desire) to support different hardware manufacturers. If they'd kept the PDA's, at least they'd have that market segment, as there are precious few PDA manufacturers these days. Jeff Hawkins must either be laughing himself silly or have ulcers, but it's truly too bad that Palm failed to follow his vision.

I blame Ed Colligan and the bean counters at Palm. Appeasing investors may make business sense, but in the case of Palm, they put all their eggs in that [smartphone] basket and a bebbeda bebbeda, that's all folks!

Tony

[jdmichal]

To be fair, I think the PDA is a dying segment. Sure, there's some limited set of people that want a PDA separate from their phone. But the vast majority would happily have the two combined, especially when subsidy costs mean that the phone is cheaper than the PDA with more functionality.

It got me when I was looking for a new PDA two-and-a-half years ago, and it's only more true now.

[Jason Dunn]

To be fair, I think the PDA is a dying segment.

I'd agree with you, except for one thing: the iPod Touch. That's definitely a PDA, and it sells pretty darn good... :D

[Janak Parekh]

I'd agree with you, except for one thing: the iPod Touch. That's definitely a PDA, and it sells pretty darn good... :D Wouldn't you argue that it's a music/video/game player that happens to be a PDA too? (Compared to WM, say, whose built-in music/video capabilities are comparatively ancient.)

--janak

[doogald]

Jeff Hawkins must either be laughing himself silly or have ulcers, but it's truly too bad that Palm failed to follow his vision.

Since Hawkins' recent vision included the Fooleo, I'm thinking that Palm was better off pursuing WebOS.

[treynolds]

Since Hawkins' recent vision included the Fooleo, I'm thinking that Palm was better off pursuing WebOS.


I think the success of netbooks has proved that Hawkins was on to something. Sometimes less is more.

[Jason Dunn]

I think the success of netbooks has proved that Hawkins was on to something. Sometimes less is more.

But only if the "less" actually delivers something. The Foleo kind of sucked in a lot of ways - crappy browser, no real software available for it, etc. It was a half-baked product based on what I saw it of.