The Good Morning Silicon Valley newsletter carried a story about Palm’s largest shareholders asking the company to sell out to another player while its fortunes are still on the rise. This raises concerns about Palm’s roadmap and vision if even their largest shareholders don’t believe them.
Why sell out?
Palm has a number of challenges to overcome:
- Maintaining relationships with distribution channels which are different and distinct for both the Treo and PDA ranges
- Palm needs a new OS that will have it ready for the next ten years. It could have done with that new OS in the year 2000
- Innovation and localisation: in order to keep its head above water in the PDA market Palm needs to innovate, Pocket PC manufacturers can leverage reference designs and even sell devices at a loss to support service businesses in the enterprise. In the cell phone market, Palm needs to localise the device to meet each carriers needs.
- Make like Dell: Palm not only needs to get better at innovation and localisation, it needs to innovate operationally; something that had a positive transformative effect on Apple. Dell is a by-word for a slick logistics chain that keeps cost down and allows for user customisation at the order stage
- One-trick pony: when HP goes into business it is looking to sell everything from a HP9000 Superdome high-end computer to an iPaq and the services to support it. When Nokia speaks to carriers it can sell them everything from all the kit to run a network to budget phones for PAYG (Pay-As-You-Go) customers
- Convergence: cell phones now have PDA functionality and so do iPods, Palm has unsuccessfully tried to make a convergence play with the LifeDrive and seems to have a crisis of ideas
- Get big or get out: As can be seen from the MP3 player market, where there is a hot, competitive sector size wins because it can bring economies of scale to bear. Palm could not have taken the gamble that Apple did in terms its forward contracts for flash memory to role out a flash-based LifeDrive even if it had the vision to do so.
Who should buy?
A lot of the heat in this discussion centres on Research In Motion, Nokia and Apple.
Research in Motion has never had the best product design and user experience, Palm could help them.
Palm’s pen computing experience could be invaluable to Nokia.
Apple is the collectively the player considered by technology pundits the people who can make a market work and has the expertise and chutzpah to make change the game devices work. Palm could bring carrier relationships and expertise.
Why buy?
Palm has a strong brand its name has been a by-word for PDAs for a long time. The Treo has made a name for itself amongst early adopters and has proven itself to be more adaptable than the Blackberry. Its product design has made it a success that has saved Palm up to now. However, much of the crown jewels within Palm (its distinctive look and feel) marched off with PalmSource acquisition by Access and even then there was a lot of work to be done to assure the future of the PalmOS as a modern platform.
- If Apple wanted to build a Palm-like device it already has much of the expertise needed, arguably the best product design team in the world and it could license or buy the PalmOS software from Access. It even has the talent to build its own OS over Darwin. However, this would necessitate a hell of a lot of work during the time that the company is migrating its hardware and software to the Intel platform and rolling out new entertainment services. This means that a Palm-like Apple device is probably not likely
- Research in Motion could poach a few of the Palm design team and licence the PalmOS software, but it has bigger issues as competitors are using the NTP case as an excuse to eat the companies lunch. In addition, services and software are more lucrative so there is already some industry signs that RIM are looking to move away from being a hardware player
- Nokia has some of the best mobile phone designers in the world, the user experience of its Symbian phones rivals Palm. It makes sense only as a way to eliminate competition, but it would be more profitable to tempt key staff away and watch Palm nose-dive into wherever dead companies go
Conclusion
OK, first of all there is the question of whether Palm needs to be sold: probably not, but a shot of energy, vision and cajones in the management team wouldn’t go a miss and this shareholder action may be the boot in the backside that they need. Bottom line is that this question can get kicked back and forth for a long time to come, what’s more its an emotive area so don’t expect a consensus soon.
If a ‘for sale’ sign went up, Palm may get a buyer, but I would expect the purchaser to come from the Far East rather than the established tech players named. I would also expect them to buy if or when the company is on its knees. Ningbo Bird, Haier, Lenovo, BenQ or HTC for example already know how to make phones, if they want cute industrial design they can buy it in as necessary from IDEO, frog design or their ilk. If the company did tout around for a buyer, you could expect the business to drop as carriers and enterprise look for alternative ‘safer’ suppliers. If the business isn’t on its knees when the for sale sign goes up, it may be by the time the deal is signed.
The crown jewels: the PalmOS software is already available to whoever wants to licence it at a discount to Windows Mobile, the value would be in the carrier relationships and the brand recognition of the Palm name.
UPDATE: Palm Addicts ran this piece in full, you can find it here. More related posts here.