Palm corporate survival: Don’t swim upstream (aka partner with Google)

palm-logoI’ve been following the avalanche of all things Android for the past few weeks. While I’m still on the fence myself, I do know two things: Motorola Droid is not an iPhone killer (what’s needed is an iTunes killer, folks) and that Palm is going down in flames… again. But I have a suggestion or two if you read on.

Poor Palm. They’re the perennial underdog of mobile computing. It’s often easy to forget that with the Palm Pilot they invented the first mobile handheld organizer with commercial viability (unlike Apple’s Newton). The Treo was a remarkable touchscreen phone that sold well. And more recently, the Phoenix rose with the well-received Palm Pre phone running the also loved Palm WebOS.

However, this strategy can not work, will not work. The reason? Palm does not have enough resources (money!) to compete in both hardware and software. At no time has this become more obvious than the past few weeks with the massive onslaught of Google’s attack on mobile OS in the form of Android for smartphones. And, by the way, this is not a Droid vs. iPhone thing. This is a Google vs. everyone else thing. Don’t forget Android is open. Meaning multiple companies manufacturing phones, licensing Android.

palm-deathbedPalm is close to becoming an also ran, despite their finesse for elegant software user interfaces (witness the playing card finger swiping ballroom dance that is Palm Pre). The Pre has question build quality, however, and one may ask what the heck are they doing in the low margin, un-winnable hardware business anyways? The future, and present of course, is in software, software, software. Yes, license and you shall reap mucho money.

So, what to do?

Simple.

1. Divest the hardware business.

2. Re-build WebOS on top of Google Android. License it to all Android handset manufacturers who don’t know how to build glossy UIs on top of Google’s base Android OS.

That’s it. I know everyone will wonder how that can be a long-term, viable business strategy. After all, isn’t manufacturing the hardware and software for a smartphone a great business? No. It’s not. It’s a great way to lose. I guarantee if nothing changes, Palm will burn through its cash, and be destitute, once again looking for a buyer or declaring bankruptcy in a matter of months.

Riding Google’s massive coat tails is a nice way to stay in the game. Licensing a wrapper for Android, additional applications, and widgets, while sounding somewhat lightweight at first blush, makes more sense when you consider the profit margins.

In a way, Palm could be the HTC of user interfaces for all other Android devices. They could partner with Motorola, Samsung for instance.

Okay, so a little out there, but I’m really just suggesting that Palm radically re-think their strategy and long-term viability.

So far, though, it appears the company is content to merely re-image the Palm movie we’ve painfully seen at least twice before.

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  • amateurhack

    I think you have most of it right. WebOS and Android are both UI's that run on top of a Linux core. I think that using your strategy would be more effective if Palm just made a build of WebOS that would run on the same Linux kernel as Android. Then, users could run WebOS on their phone _instead_of_ Android.____I disagree, however, that Palm should abandon the manufacturing business. Palm makes a compelling product with a unique form that makes it stand out from the market place. Future updates to the hardware will make it even more compelling. The thing that I think some miss is that Palm does not need to be a iPhone-killer for palm to succeed. In fact, Palm can regain profitability in just a few quarters, even with slightly lower margins, if they continue to sell phones at their current rate. iPhone-like sales numbers are unneccessary, and unrealistic.____That is not to say that Palm hasn't made missteps, or that they need do nothing to continue their current trend. WebOS needs to be completed (it is woefully lacking in some features even now) and they do need to upgrade the hardware in a new generation of devices, and they need to do all of that ASAP(!) to maintain their momentum.

  • amateurhack

    I think you have most of it right. WebOS and Android are both UI's that run on top of a Linux core. I think that using your strategy would be more effective if Palm just made a build of WebOS that would run on the same Linux kernel as Android. Then, users could run WebOS on their phone _instead_of_ Android.____I disagree, however, that Palm should abandon the manufacturing business. Palm makes a compelling product with a unique form that makes it stand out from the market place. Future updates to the hardware will make it even more compelling. The thing that I think some miss is that Palm does not need to be a iPhone-killer for palm to succeed. In fact, Palm can regain profitability in just a few quarters, even with slightly lower margins, if they continue to sell phones at their current rate. iPhone-like sales numbers are unneccessary, and unrealistic.____That is not to say that Palm hasn't made missteps, or that they need do nothing to continue their current trend. WebOS needs to be completed (it is woefully lacking in some features even now) and they do need to upgrade the hardware in a new generation of devices, and they need to do all of that ASAP(!) to maintain their momentum.

  • erleb

    what nonsense! besides the fact that palm has not only not lost this game but is actually make remarkable headway towards emerging as a (once again) major player, this article offers nothing but unsubstantiated bad advice. there is no viable business model presented and following this trendy yet desperate direction would be corporate suicide. Palm is steadily following a well thought out, if at times not perfectly executed, plan and should continue to do so.

  • erleb

    what nonsense! besides the fact that palm has not only not lost this game but is actually make remarkable headway towards emerging as a (once again) major player, this article offers nothing but unsubstantiated bad advice. there is no viable business model presented and following this trendy yet desperate direction would be corporate suicide. Palm is steadily following a well thought out, if at times not perfectly executed, plan and should continue to do so.

  • daniel

    I don't understand why they should go for an "android wrapper" when they already have a very capable, arguably better OS. Specifically they seem to have apple a bit scared on executing the multitouch patent (due to their own arsenal which google doesn't have–its either that or apple doesn't find palm significant enough to pursue). Interfacing with google maps on a pre is superior to doing the same on an android device because of this (in the case of the droid, this extends to web browsing and e-mail as well).

    I don't think it would be a bad idea to license webOS out though. Unfortunately for them, the time to do this was probably when everyone was "ooooooohh aaahhhhh webos." Which was 6 months – year ago. Now Android has picked up significant momentum in this department and I don't know that palm could catch them. They may now be backed into a corner they can only get out of with a even more amazing device than the pre.

    They are in a tough spot. They got a bit of a jump out of the pre and webos, but I think they are back on the decline with regards to significance. I think they are one more round of android devices and/or one more major release of the android OS away from certain death. They should have had better upkeep of webos. Its still a beta OS in my opinion [I feel the same about android 1.x]. The pixi should have been a much cooler device and > Pre.

    I currently have a Pre. Miss my iphone [AT&T service=suck]. Will likely get an android device in the next six months.

  • daniel

    I don't understand why they should go for an "android wrapper" when they already have a very capable, arguably better OS. Specifically they seem to have apple a bit scared on executing the multitouch patent (due to their own arsenal which google doesn't have–its either that or apple doesn't find palm significant enough to pursue). Interfacing with google maps on a pre is superior to doing the same on an android device because of this (in the case of the droid, this extends to web browsing and e-mail as well).

    I don't think it would be a bad idea to license webOS out though. Unfortunately for them, the time to do this was probably when everyone was "ooooooohh aaahhhhh webos." Which was 6 months – year ago. Now Android has picked up significant momentum in this department and I don't know that palm could catch them. They may now be backed into a corner they can only get out of with a even more amazing device than the pre.

    They are in a tough spot. They got a bit of a jump out of the pre and webos, but I think they are back on the decline with regards to significance. I think they are one more round of android devices and/or one more major release of the android OS away from certain death. They should have had better upkeep of webos. Its still a beta OS in my opinion [I feel the same about android 1.x]. The pixi should have been a much cooler device and > Pre.

    I currently have a Pre. Miss my iphone [AT&T service=suck]. Will likely get an android device in the next six months.

  • ifown

    Rebuild webOS on top of Android? hahaha…what nonsense! webOS is an awesome multitasking mobile operating system as it is. Both Android and webOS already work well while running on top of Linux. Why would you want to degrade it's functionality by rebuilding it on top of Android that will only make it run slower? Palm is doing just fine as more developers are now learning about how to build apps for webOS; and from the APIs, functions, and capabilities I've discovered for webOS, it's incredible!

    If a Nokia/Palm deal ever surfaces, that should end your lack of capital concerns.

  • ifown

    Rebuild webOS on top of Android? hahaha…what nonsense! webOS is an awesome multitasking mobile operating system as it is. Both Android and webOS already work well while running on top of Linux. Why would you want to degrade it's functionality by rebuilding it on top of Android that will only make it run slower? Palm is doing just fine as more developers are now learning about how to build apps for webOS; and from the APIs, functions, and capabilities I've discovered for webOS, it's incredible!

    If a Nokia/Palm deal ever surfaces, that should end your lack of capital concerns.

  • beenthere

    I think eleb misses an important point. Android has scale through the sheer breadth of its handset hardware partners. Operators are reluctant to commit to a platform provided by only one vendor (look no further than Symbian, which Nokia has been trying to propagate across the ecosystem with declining success). While the Pre is a nice device, Palm will need massive cash to scale and compete globally against the likes of HTC, Samsung, Nokia and LG (not to mention the secondary players of Motorola and Sony Ericsson) in the middle ranks of the smartphone market. Apple and RIM have the higher end largely to themselves (just look at the ASP and profit numbers if you don't believe me: Apple made more profit than Nokia on a fraction of Nokia's volumes, putting Apple right at the top of the smartphone market).

    The speculation about a Palm / Nokia deal doesn't survive analysis. Nokia has 4 software platforms already and growing internal awareness that it isn't a very good software engineering company (Series 30, Series 40, Symbian and Maemo). It has the largest army of software engineers (there are nearly 9k people working on Symbian alone) and Nokia already has 5 UIs (S30, S40, S60 non-touch, S60-touch, Maemo's legacy stuff seen on the N900 and the leaked Maemo stuff based on QT). What possibly could Nokia gain from Palm? More engineers in a location far away from its primary decision centre (a 10 hour time difference between Helsinki and Silicon Valley). Yet another UI to need to roadmap and position to customers? Nokia's already got two big acquisitions which are not working out like the business leaders promised: The 8 billion spent on Navteq and the $.5 billon spent on Symbian, both of which are failed to improve Nokia's earnings or valuation.

    The platform & UI landscape at Nokia right now is like brands at GM. There are too many and to survive some will have to be terminated. Speculate on Palm all you want but put a backstop on your investment, as Nokia won't be buying Palm.

  • beenthere

    I think eleb misses an important point. Android has scale through the sheer breadth of its handset hardware partners. Operators are reluctant to commit to a platform provided by only one vendor (look no further than Symbian, which Nokia has been trying to propagate across the ecosystem with declining success). While the Pre is a nice device, Palm will need massive cash to scale and compete globally against the likes of HTC, Samsung, Nokia and LG (not to mention the secondary players of Motorola and Sony Ericsson) in the middle ranks of the smartphone market. Apple and RIM have the higher end largely to themselves (just look at the ASP and profit numbers if you don't believe me: Apple made more profit than Nokia on a fraction of Nokia's volumes, putting Apple right at the top of the smartphone market).

    The speculation about a Palm / Nokia deal doesn't survive analysis. Nokia has 4 software platforms already and growing internal awareness that it isn't a very good software engineering company (Series 30, Series 40, Symbian and Maemo). It has the largest army of software engineers (there are nearly 9k people working on Symbian alone) and Nokia already has 5 UIs (S30, S40, S60 non-touch, S60-touch, Maemo's legacy stuff seen on the N900 and the leaked Maemo stuff based on QT). What possibly could Nokia gain from Palm? More engineers in a location far away from its primary decision centre (a 10 hour time difference between Helsinki and Silicon Valley). Yet another UI to need to roadmap and position to customers? Nokia's already got two big acquisitions which are not working out like the business leaders promised: The 8 billion spent on Navteq and the $.5 billon spent on Symbian, both of which are failed to improve Nokia's earnings or valuation.

    The platform & UI landscape at Nokia right now is like brands at GM. There are too many and to survive some will have to be terminated. Speculate on Palm all you want but put a backstop on your investment, as Nokia won't be buying Palm.