I’ve contributed an article about Palm’s investment in Europe over at Palm Addicts. In the news this week Palm announced that it was opening a new development centre in Swords County Dublin (you can read about it here at the Palm Addicts blog), what does it mean for European Palm users?What is surprising is that Palm has not made this move sooner, given the focus on the Treo range as the primary play for the future. With the exception of some notable exceptions like Italy the market for mobile phones is dominated by subsidised handsets provided by the carriers. Given that the carriers invest 100USD or more per user, they need to guarantee their return somehow by trying to improve the average revenue per user (ARPU). This means locking consumers in with tightly integrated services. Part of the reason why Nokia’s crown slipped was because the company would not bend to the carriers will.
In the UK, five years ago the Nokia brand got bigger than the mobile phone company because of its legendary ease-of-use and iconic chocolate bar format. Club Nokia was the straw that broke the camels back threatening carriers ability to earn money from ringtones and wallpapers.
Vodafone suddenly dropped Nokia from its roster of handsets and took up with Japanese handsets by Sharp and Panasonic; the carriers learned their inherent power. The market has become more competitive for mobile phone devices. Most technology companies that we know are really marketing organisations. Their logistics are outsourced, their products are based on reference designs and sometimes the only cosmetic change is the badge on the front of the device. OEMs like HTC are no longer happy making for other manufacturers, but with Microsoft’s assistance have started selling direct to the carriers. Mobile phone companies had the marketing savvy, they had a brand and they had distribution. T-Mobile and Orange pioneered this approach carrier-side.
Palm entered a market where it has had to dance with the carriers and the first few times it has got it wrong. The Orange implementation of the Treo 600 allegedly had some of its functionality curtailed to help sell ‘push-to-talk’ services. The implementation meant that Orange had lots of dissatisfied users and people like me went out and bought the carrier neutral version of the device instead, so Orange probably sold less services, not more like they would have expected.
Palm can’t let this happen in the future. Europe has a level of mobile phone penetration is higher than the US, Europeans change their phones every 12 – 18 months rather than the 2 years or so for a Verizon customer in the US. Europe is rolling out UMTS / 3G services, but despite the hype there are no killer apps, partly because the handsets aren’t great: so for Palm there is a real market opportunity. Even though Palm is a Microsoft licensee it will still be competing against established handset manufacturers like Motorola, HTC and Sagem. Microsoft’s motives are further complicated because the company wants an end-to-end play. Telecoms back-end systems, transactions, service provision, media creation and playback, instant messaging, user experience, enterprise applications and information security all running on Microsoft platforms. Would they burn Palm to improve their overall interest? No question about it.
Look to the PC marketplace, Steve Jobs has said on numerous occasions there are two PC manufacturers making a profit – Dell and Apple. Other players stay in the marketplace for strategic reasons, but Microsoft makes money on each Windows box, whatever happens to the manufacturer.
Then there are aggressive Asian players like Siemens/BenQ, and is likely to be joined by Chinese newcomers like Haier or Ningbo Bird. Chinese manufacturers have a lot of work going into embedded Linux devices that are constantly improving. US manufacturer Danger, who make the Hip-Top devices had both Orange and T-Mobile as investors, the tight integration including storing user data like address books on the network and large screen suitable for multimedia makes it an interesting proposition.
Fellow Palm licensee Qool Labs have a fantastic Palm powered product that has not been distributed in the West. European handset manufacturers with entrenched relationships and brand equity like Sony Ericsson and Nokia are unlikely to lie down either. Indeed Nokia’s 9X00 series and the E61 are exceptionally well-designed competitive devices. Palm needs to have an R&D / localisation facility close to the customer base filled with talented people.
Trying to do the carrier-specific development from Silicon Valley or Asia puts them on a different working day from the clientele, placing a strain on project management and close cooperative client working. It is not conducive to supplying the kind of carrier integration needed to supply large-scale orders that Palm needs in order to achieve critical mass in the market.
Palm’s expansion of its Dublin logistics and operations site to include localisation is a statement of intent that they are now going to get serious about Europe, hopefully ensuring an even better user experience and favourable subsidies for Treo users.