As much as we like to poke fun at one of RIM’s historical competitors here at BlackBerry Cool, you have to feel for them. After the 100% negative market response to their recently unveiled
folly Folio product and news that they were being partially bought out by Bono, it’s obvious that the future is unclear for the House of Treo.
Many market analysts have stepped up to provide their take on what will happen to Palm, notably Arik Hesseldahl of BusinessWeek and Tero Kuittinen of TheStreet.com. Hesseldahl puts great stock in Palm’s hiring of former Apple executives Jon Rubinstein and Fred Anderson, while Kuittinen seems less enthusiastic but lays out a checklist of necessary steps the company needs to take.
Who better to help gird Palm for the onslaught than former Apple folks? IDC analyst Randy Giusto says what Palm needs is a round of product upgrades that will appeal to consumers targeted by Apple’s iPhone marketing blitz, but also stand up against RIM amid enterprises. When individuals buy a smart handheld for themselves, they tend to buy a Treo, Giusto says. But when the boss is footing the bill, the device is often a BlackBerry. “The biggest thing that Palm needs is some serious innovation across its products lines,” Giusto says.
Palm used to be competitive during an era when global sales of personal digital assistants, or PDAs, were in the 10 million to 15 million unit range and the Palm OS was a unique selling point. In 2007, smartphones are snuffing out PDAs as a separate product category. Smartphone sales in 2007 are going to be roughly 100 million units. The Palm operating system has become effectively obsolete and the company is now forced to compete on hardware.
Anderson, who co-founded Elevation Partners with McNamee, stepped in as Apple’s finance chief during the computer maker’s darkest days in mid-1996. Apple was losing money, strapped for cash, burdened by debt, and its sales were in the doldrums. By 2004, when Anderson stepped down as CFO, Apple had almost $5 billion in cash and sales, and profits were on the rise.
Anderson says Palm is in a very different position from the Apple of a decade ago. “When I joined Apple it was in a weak financial position,” Anderson says. “Palm isn’t like that. At that time, the PC market was maturing and growth was slowing for everyone, and Apple had to undergo a turnaround in that environment. Here, there’s a rapid growth opportunity.”
To succeed, a vendor has to find a niche where it leads in some feature/size/performance category. And that is a nightmare for Palm, a hothouse flower that has never shown an ability to integrate new features rapidly and push prices down at the same time.
Palm’s hardware trouble is succinctly summarized by the Treo 750, a spectacularly uncompetitive 3G device that started selling widely in Europe last February. This is probably the best Palm is offering this summer, and the performance gap between it and the rest of the field is turning into a yawning abyss right around the third quarter. How much improvement is needed is spelled out in the atrocious Treo 750 specs. Palm is missing every single benchmark by a generation or so. It can’t compete on size or display quality or camera quality or WiFi/GPS. The company needs to improve display, camera, processing power, WiFi and GPS functionality while shaving device weight and thickness by 20% to 40%.