Palm Update
March 19th, 2010, 9:49am by Mike
I realize that a lot of the discussion around Palm (particularly the financial stuff, which I don’t really know anything about) has moved over to Twitter, but there have been some big developments in the last couple of days. Not unexpectedly, Palm announced that revenues weren’t what they had hoped, and that of the nearly 1 million phones they shipped, they sold just over 40%. The Verizon deal hasn’t really done much for them, and it sounds like one of the reasons may have been a restrictive deal regarding Sprint exclusivity, which prevented Palm from debuting on Verizon until after the Droid launch/marketing blitz. The webOS story is sounding more and more to me like a series of badly timed announcements and releases, which is too bad.
Now, most analysts have downgraded the stock as it has fallen, and AT&T is rumored to be delaying the launch of their webOS handsets. There’s much speculation about the future directions for Palm, with many indicating selling out as an option (e.g., to Google).
It’s not all doom-and-gloom, though — seems like every day there are more apps and platforms getting ported to webOS, and with the plugin development kit, Palm has stated (and some developers have agreed) that porting iPhone apps and platforms to webOS is simplified. webOS version 1.4 sounds like it fixed lots of things and added new features like video recording (but also unexpectedly changed some stuff under the hood). And there is some chatter about new hardware (on Sprint, ugh), even the appeal of a webOS-based tablet.
So, Palm guys, what’s the feeling out in Palm-land? Are they going to make it? What do you think about a Google-Palm buyout, and what does that mean for webOS?
March 19th, 2010 at 10:12 am
I should’ve listened to Kelvin and unloaded every last share this week.
Buyout: at this point, the most likely reason anyone would buy Palm would be to get their patent portfolio and employees. Sad, since webOS is amazing. I could only see HP or Samsung actually buying Palm to keep the business running, and both are unlikley. The 1.4 update is great, especially in battery life but also in responsiveness. The apps continue to excel. And IMHO it’s still the best phone on the market. Clearly, that’s a minority opinion. 🙁
March 19th, 2010 at 2:18 pm
Yeah, things are pretty ugly on the stock front, although not really surprising after the warning. Things are going to get uglier before they get better, though. With over a million units in carrier inventory, a big percentage of which were Pixi’s, the majority of the focus will be moving phones that generate no additional revenue one way or another (rebates, promo’s, software updates, etc). Good for consumers, but bad for business.
I generally don’t believe anyone will buy Palm for webOS, as long as Android is out there. There are some theoretical advantages to having a proprietary platform, but unless that platform is widely adopted (a la iPhone), there are pretty big disadvantages to swimming against the grain. At this point, anything not Apple, Android, or BB seems to be not selling. WinPhone7 looks interesting, too.
I concur with jake that I really do love my phone, and it’s a shame more people haven’t felt the same. I suspect I could learn to love Android too, anAaaaaaaaaaad I’m not surprised that Google has a hit in their hands. 1.4 seems fine, other than breaking Flickr Addict :(.
March 19th, 2010 at 3:29 pm
I don’t think it’s true that people don’t love webOS — everyone I know who has a webOS device (n=2, see comments above) seems to love it. I think it’s just that people aren’t trying it.
I don’t think that the average person sees the advantages to webOS over iPhone (tons of apps) or Android (tons of phones). I think the advantages that it was marketed on — multitasking, calendar integration/Synergy, and the “not overbearing Apple” factor — appeal to a small subpopulation of nerdy people (like us). I think Palm could have done a better job of marketing — the creepy woman ads and the “smartphone for Mom” ads didn’t cut it, but both Joanie and I separately remarked that their new ad was a huge improvement (couldn’t find it online, but while searching, I found this one, which also seems to be a huge improvement). Maybe they’re turning the corner on advertising.
As for Android, I think I’d need a nice skin, like the Sense UI, to really like it. Still looks/feels a little too linux-y for me.
March 21st, 2010 at 1:17 am
Hindsight being 20/20 & all that. But Engadget basically gets it right. Palm should’ve moved heaven & earth to launch the Pre in April with good commercials and a 3-month exclusivity.
http://www.engadget.com/2010/03/19/palm-this-is-your-survival-guide/
Still excited about webOS, worried that Palm won’t survive (taking my money with it). If I had to guess, I’d say Palm has a 30% chance of surviving independently, 10% chance of being bought wholesale with webOS living on, 40% chance of being bought to get their engineers & patents, 10% chance of a sale for IP only, and a 10% chance of going completely bust.
March 21st, 2010 at 10:49 am
I finf the engadget armchair quarterbacking unhelpful and annoying. They whine about the commercials, the exclusivities, etc but nothing they suggest would change the fact that not a single Engadget editor uses a Pre or would recommend it to a friend. In a perfect world, Pre would be completely free of hardware and software bugs, be available on all carriers, etc. But I doubt that would change the fact that the Pre is pretty much everyone’s second choice (if that). Palm bet the company that they were better at writing software than Google. For a while, it looked like they were right. Now, the question is whether they can survive on the crumbs from the table. Operationally, the inventory is a huge overhang, but the good news for us users is that unless disaster strikes (returns from carriers), Palm will eventually shove the million phones into the market one way or another. 2.5 million webOS users oughta be enough to ensure that we don’t get completely ignored by developers, website designers, etc.
March 22nd, 2010 at 7:04 am
ARS Technica’s eulogy is a better, objective read than Engadgets’.
http://arstechnica.com/gadgets/news/2010/03/rip-palm-its-over-and-heres-why.ars/
March 22nd, 2010 at 9:13 am
I had sent that to Instapaper to “read later,” but hadn’t gotten around to it until now!
So what do you think of the “long tail” argument regarding the App Store? I tend to agree, to some extent — while everybody has one of a couple Twitter clients (leaving many many on the App Store with very few users, and no need for more Twitter clients), the weird little apps can be compelling to some people. However, looking through my phone, there aren’t all that many that I’d consider part of any long tail.
Here’s my scorecard for the rest of the article:
— I’ve agreed numerous times about the timing of the launch of the Pre, and we’ve all agreed ad naseum that if they could have done it faster, I’m sure they would have. It sucked that the Pre came out a week before the 3GS, woulda been great if it were 3 months before. I wonder, if they had spent an extra 2 months shoring up the App Catalog and nailing down the little bugs, whether releasing it after the iPhone may have even been better than a week before. At least they’d have gotten out from under the iPhone publicity sucking shadow a bit.
— Totally agree on the marketing toward women, but I think that only applies to the one “mom” advertisement, not the entire phone. I don’t agree that the hardware, OS, or anything else was specifically aimed at women, so I don’t see that as a factor in their problems.
— Hardware problems have been pretty common, from the little I’ve heard from you guys, too (Jake, didn’t you send at least 1 back? Can’t remember if Kelvin has). I disagree that the form factor is a loser — that argument implies that the only successful touchscreen phone form factor is the keyboardless slate. While I like that, it’s clearly not for everybody, and we’ve seen that other phone makers (like RIM) have failed miserably trying to emulate the iPhone’s form factor.
— The lock-in argument is interesting, but ultimately not convincing. I could buy a Windows machine today, spend 5 minutes setting up gmail and Exchange, and not miss a single message, either. That’s not what’s tying me to the Mac. It’s the fact that I think it’s a better user experience for me, and that I have a lot of history and investment (financial and otherwise) in the platform. Data portability, while it makes switching platforms easier, doesn’t hurt Palm any more than it hurts anybody else.
March 22nd, 2010 at 12:56 pm
You’re putting some real thought into this– wish you had done so earlier :(. I’ll chime in here too.
– long tail of apps: they are huge for marketing the platform. 140K apps doesn’t resonate with consumers, but what really hits home is when you are at the BofA ATM and there’s a sign advertising their app for Android and the iPhone. I feel like 140K times a day, I’m reminded that I backed a loser! Seriously, Apple is getting invaluable free marketing from the apps, and that hurts Palm disporportinately to how much the lack of a Chipotle app actually hurts Palm’s users.
Lock-in. It’s something that’s worried me, that the lack of lock-in would make it hard for Palm to keep users once they got them. I do love how agnostic webOS is, but certainly my data is completely portable. Unfortunately, Palm hasn’t gotten to the point where they have to worry about retaining customers, so that’s a moot point.
Build quality: it is what it is. I love the form factor, but the build quality isn’t great. Jake, Ed, and Steph all have had replacernents. I haven’t, but there are niggles.
March 22nd, 2010 at 2:48 pm
BTW, the CEO of my company is a Treo user and a long-time admirer of my Pre, but he hasn’t switched because he needs the world-phone capabilities of GSM. This morning’s announcement of an AT&T Pre puts me in a quandary– no one ever got fired for recommening Palm, right? Bueller?
March 22nd, 2010 at 7:02 pm
Not clear to me why a Treo user would hold out for a Pre — it’s not like they’re the same OS or anything — and I’ve never heard you guys talk about running legacy Palm OS apps in the emulator.
How do you think webOS will do on AT&T? Apparently it’ll appear “in the coming months,” no definite date. They also just announced their second Android phone was coming soon, too (the Dell Aero), to follow up on the Backflip (and the Nexus One, I guess, so that makes 3). The AT&T Pre won’t allow the Verizon hotspot feature, which kinda sucks, but I’d be mad if they offered it and didn’t even offer tethering to iPhone users.
March 22nd, 2010 at 9:00 pm
I can’t imagine it going well with AT&T, but who knows. Anyway, the appeal of the treo and Pre to him is really the keyboard (He has a WinMob Treo). He had a G1 for a while but went back to the Treo. Not sure that the Pre will actually serve him all that well, but we are an exchange shop and the exchange support on the Pre is good enough as far as I can tell. Beyond that, I don’t know what features he’d want to carry over from his Treo.
March 23rd, 2010 at 2:07 pm
I’ve been wondering what could be AT&T’s motivation for launching the webOS devices, the ones they already know are not appealing to consumers? Possible that they committed a year ago and are now simply going through the motions, but it seems to me that there must be a way to buy out the contract rather than waste their time/shelf space, etc.
My hope is that they know something we don’t as far as Palm’s webOS roadmap. At this point, Palm (well, their carrier partners) have a crapload of inventory to move, and they can do that by increasing marketing spend, reducing price (rebates), or by introducing new, attractive features via hardware. The 3rd is where they should be putting the bulk of their effort, because it’s the only activity that is an investment rather than a one-off expense– work on webOS benefits current devices as well as future ones. So what if Palm says to their new partners (AT&T, Verizon, China Telecom) “yeah, we know they kinda suck now, but in a month, we’re pushing out an update that will please your current customers and make these babies fly off the shelves. Don’t give up yet.” Yeah, I can dream, but as long as I’m dreaming, what would be a game changing software feature? WebOS doesn’t do voice commands, voice dialing, anything voice related, so that’s gotta be in the cards, but it wouldn’t really move the dial. Personally, I’d love to see an Android emulator in a card. Not even an emulator, I bet the PDK allows enough hardware access to make a true Android virtual machine in a card. An iPhone emulator would be even better, but Apple would sue.
What do you think? If WebOS could run Android apps, is it more appealing? You still couldn’t run the augmented reality apps that require a compass, but you could run GMail, at least!
March 23rd, 2010 at 3:17 pm
The PDK is effectively a way to easily port iPhone apps, so Android emulation/ translation or at least porting would be good. Not sure what Android apps I’m missing, though. GMail and Google Maps?
March 23rd, 2010 at 5:23 pm
If it’s to be believed, it’s data like this that spell doom for webOS. More of the developers surveyed are planning on developing for RIM or Symbian than for webOS. In fact, webOS barely beats out Win 6.0, an OS that we all know will soon be obsolete, since Win7 won’t be backward-compatible.
In the full report, of the developers surveyed, 2% carry a webOS device, vs 38% iPhone and 37% Android-based phone.
March 23rd, 2010 at 6:38 pm
So if we take it for granted that lack of developer support “spells doom for WebOS,” does an Android emulator solve that problem in one fell swoop?
BTW, Jake, the ability to port iPhone apps easily is not the same as having iPhone apps ported. We won’t get to 10K apps in the next 3 months without an Android emulator (well technically, the PalmOS emulator probably gets us there). Anyway, if you and I both think that the app landscape is fine on our phones, why aren’t they selling? What would be the most effective way to make them attractive?
March 23rd, 2010 at 9:17 pm
I think Palm is dealing with some serious negative brand equity. But that’s not the root cause. During those 5 months when Palm was (at least) the clear #2 phone, it was hampered by bad, limited advertising and availability. It sold well enough, even if a little below target. The Verizon magic bullet failed miserably, and Palm is in a worse shape now; the first thing people say when they hear Palm is “aren’t they in trouble” or something along those lines.
The only way to sell phones now is to sell them cheap. Hearing that AT&T is launching at $150 is stunning, considering how far the market has come in 1 year. I’d pay it, but the price is high enough to push them to other options. Palm is probably doing all they can to push sales, but really that’s gotta show up on the store shelves pricing otherwise it’s useless.
Breakthrough hardware is the only other way forward, and that’s not coming until summer… if at all. The Pre Plus is great, but the market has spoken and it wants giant all-screen devices, no matter how crappy the OS (Storm) or how massive the hardware (Droid). If Palm doesn’t release their 800×480 device by August, they won’t survive as an independent company into 2011.
Somewhere, be it $2/share or $5/share, they become attractive enough for their engineers & patents that someone will pay. A law firm will buy ’em and start suing everyone before they go broke. But webOS? I give it a 50/50 chance. Android is going to crush all in this market shortly, and Palm looks like it will end up roadkill. I always maintained Nova had to be a clear #2, and they were. But Palm squandered that short-lived period, and now it becomes less compelling with every new Android device.
Survival probably means a $0 Pixi and $50 Pre in store at AT&T, Verizon & Sprint, with a new hero device at $100-150 on a major carrier by August. If I were Rubenstein, that would be the focus of the entire company day & night until it happened.
March 23rd, 2010 at 9:20 pm
Oh, and I think AdMob’s survey is as useful as their other metrics. No way has interest in WinMo 6 doubled in 6 months! I suspect it’s largely a product of selection bias and a poorly worded survey. Not to say it’s not right, but I put as much faith in it as my own blind guesses.
March 23rd, 2010 at 9:28 pm
I guess what I’m tring to say is I think Palm did a great job on the Pre and Pixi, and I’m shocked at how poorly it’s sold. Clearly I’m not the person to ask.
March 23rd, 2010 at 9:35 pm
Josh Topolsky just posted a blog on the apps he needs for his new phone, and I just spent the last 30 minutes on the train writing up a comment to convince him to get a Pre. A high profile evangelist would sell a few devices.
http://joshuatopolsky.tumblr.com/post/469020707/apps-i-need-on-any-platform
March 23rd, 2010 at 10:15 pm
@Jake – That’s why I led off with “if the data are to be believed.” While I’m sure there’s bias in that survey, I think the point is that it’s directionally accurate, and not off by orders of magnitude, probably.
Love that Topolsky had to jailbreak his iPhone to get that stuff (having the temp in the status bar was something I added just after jailbreaking my phone – “Weather Icon,” if you’re interested).
So I guess you guys have seen the officially-refuted rumors that Palm was going to dump webOS and put a prettified Android on their hardware? Kelvin called this a few days ago when we talked. I guess that buys you apps, but is Palm’s hardware the most compelling Android hardware? They’d really have to step up their game — even the Droid’s processor is half as fast (550 MHz) as the now-standard 1GHz Snapdragon.
Think that they could keep webOS alive as an option while also doing an Android phone? Akin to their days of releasing Treos with either WinMo or PalmOS?
If Palm just becomes a vendor for Android phones, will they be at all interesting anymore? If so, why? I think it’d be a shame for webOS to end up basically as an Android skin.
March 24th, 2010 at 11:05 am
Droid, Pre and 3GS share the same processor architecture as Snapdragon (as does the A4), so they will naturally get speed bumps if they evolve. Snapdragon would be a pretty nice fit in a new Pixi Plus, actually. But it needs to be said– Pre had the fastest chip in the industry when it came out (for 2 weeks). They claim that controlling their OS lets them take advantage of emerging hardware technologies faster, so they might be able to leapfrog the competition again. We’ll see.
I guess it’s an ongoing question– how much of the success of the new breed of Android phones is due to impressive hardware specs and how much due to Android? Palm clearly missed on both counts, but it’s tough to know what is the baby and what is the bathwater.
Personally, as a webOS fan, I would rather have an Android emulator to tap the Android app ecosystem than a WebOS skin over Android. But I suspect the latter is easier for the market to digest. But I have a hard time seeing Palm competing with HTC or Motorola on the basis of hardware alone.
As for Nova needing to be #2, Palm went head-to-head against Google, where the odds favored the company with 60 times more employees and money to spare. They never had a shot at being #2 at least in sales.
March 24th, 2010 at 3:07 pm
Eh, Google has had far more misses than hits over the years. There was the Wikipedia killer (Knol), the Flickr killer (Picasa), the YouTube killer (Google Video) and so on. None had the push behind them that Google dedicated to Android, but it wasn’t obvious at the time how successful Android would be after a half-decade of failed efforts of a Linux phone. Still, if Google offered Palm a deal to be the lead partner back in late 2008, Palm should have swallowed hard and taken the deal– I’ve said as much before.
And I didn’t mean Nova had to be #2 in sales, more that it had to be a better platform than anything else. And it certainly was for 6 months, and still might be. Let’s face it, as a platform it’s worlds ahead of Blackberry or Symbian or WinMo today.
I’m less pessimistic than yesterday, but not by much. AT&T & China launches will help. Android looks fairly doomed in China, so Palm has a chance there, and in Germany, and in the US. I’m still shocked the Pre is available on so few carriers. Maybe it would only make a 10% difference in sales, but you never know if it might catch fire.
March 26th, 2010 at 11:05 am
ok here’s my latest plan to save Palm, or at least buy some time. Palm should enter into a broad, cross-licensing patent agreement with the major Android players, especially Google, HTC, Motorola and Dell. The agreement would also give the licensees the right to use the patents in countersuits. This is similar to what Verizon and AT&T did to sure TiVo, borrowing licenses from Intellectual Ventures and Microsoft, respectively.
it’s a pretty scumbag desperate move, but it beats suing directly. Besides that, it lets Palm concentrate on business. Now that I think about it, Palm should just sell all their IP to Google in exchange for perpetual licenses, so they can keep clean hands. $500 Million is probably a fair number, as Google wouldn’t mind overpaying a bit.
certainly a long shot, but this would break the news cycle and give Palm plenty of cash to survive several years. Google gets a major weapon in the war against Apple, and maybe the increased threat of Global Thermo Patent War will get the industry to stop this sue-happy strategy. If this happens, it would really be a WOPR.
March 26th, 2010 at 2:42 pm
Doesn’t seem to me that Google would be the one interested in Palm’s patents– they probably have plenty of IP of some sort if they ever get around to countersuing Apple. Google would only want Palm’s patents to prevent Palm from suing them or their licensees, so for Palm to unlock the value of their patent portfolio, they’d have to threaten to go on the offensive. It worked for TiVo! On the other hand, HTC has a huge incentive to acquire some defensive patents, but who knows how much money we’re talking about.
May 17th, 2010 at 4:48 pm
“Now that I think about it, Palm should just sell all their IP to Google in exchange for perpetual licenses, so they can keep clean hands. $500 Million is probably a fair number, as Google wouldn’t mind overpaying a bit.”
The prelim proxy that was just released says that “Company C” offered to buy some patents and a non-exclusive license to WebOS for $800M, not too far off your number. Interesting that Palm decided the rest of the company was worth $600M by selling out completely to HP. Hard to see that as anything but a white flag.
May 17th, 2010 at 10:20 pm
Well, a webOS license would just about doom Palm assuming HTC was the buyer. Palm would bear all the development costs & HTC would pay nothing additional in licensing. So Palm would be at a cost disadvantage going forward. It would only make sense if Palm licensed webOS to others at the same time. I think they were wise to reject that offer. $800 million for IP alone would be a different story… that would only remove Palm’s ability to eventually sue Apple to recover cash for Elevation Partners.
Also… not sure if it worked for TiVo. And why no love for my War Games reference?
May 18th, 2010 at 1:15 am
Palm would be at a cost disadvantage wrt HTC whether HTC sells an Android handset or a royalty-free webOS one, but given the choice, I’m sure Palm would prefer help getting webOS to a critical mass, which they can’t seem to do on their own. If HTC made that offer, I bet they were just paying lip service to licensing WebOS. They have no reason to commit real development resources to the webOS market. The patents were the real crown jewels to them. I’m no legal expert, but from what I can tell, HTC’s countersuit against Apple seems paper-thin. Palm’s patents would have given them 10-100 times as many shots-on-goal.