For Sale: Palm

So there’s all kinds of talk that Palm is putting itself on the block, looking for someone to put it out of it’s misery. Seems, people are reporting that Palm while profitable now has seen the iPhone writing on the wall and wants to get out while the gettings good. To me, this sounds perfectly reasonable. Palm has been selling the same operating system for 5 years with no sign of a new one and the same phone (don’t even try to bring up PDA’s) for 3 years. They took a huge market leadership position and squandered it doing, more or less, nothing.

There’s a couple interesting interviews I’ve read recently that are relevant. I just read this one with the handera guys. There’s a lot of finger pointing, some surprisingly dumb suggestions and a few things of moderate interest, but I think one very interesting nugget was this quote:

Q: Do you think Palm should maintain their dual-OS strategy? Can OS Garnet (AKA “FrankenGarnet”) be massaged into a serviceable low-end mobile OS for another several years?

A: We have no inside knowledge of this, but it appears to us that Palm wants to run PalmOS apps on Windows Mobile which would be a great differentiator in the smart phone market.

Now that’s interesting. Is that what they bought back Palm OS for? To build it into some kind of virtualization software for Win Mob? If that were true, and obviously that’s a big if, if PalmOS wasn’t already dead this would kill it. Doing this would definitely speed up the process, at least. A huge portion of people who would normally buy PalmOS would switch over to the ever more promising Win Mob and developers would simply stop building for PalmOS.

The other interview I read was with Jeff Hawkins. For those of you who don’t know, Hawkins is very literally the source of everything good that Palm has ever done. He made the first Palm Pilot. After 3Com came onto the scene and started screwing everything up he left and founded Handspring which came up with the Visor as well as the Treo. After Palm realized it couldn’t do anything on it’s own, it bought Handspring and launched the Treo. Hawkins had to leave again after that and founded Numenta some crazy neuroscience company.

Now in this interview he talks a bunch about his work at Numenta. He also talks about his continuing work at Palm. Apparently he’s been in there working on some mysterious new product, it does not sound like an extension of the Treo, but something a bit different from that.

We’re going to be announcing something…but I won’t tell you what it is…we will be launching this year, not in the distant future. I’ll give you a much bigger hint: I’m going to be speaking at Walt Mossberg’s D Conference in May.

Well now, that’s interesting. I wonder if it ties in with his work at Numenta at all. I wonder what it is, that’s the conference where Jobs and Gates are going head to head on stage. Could this new product save palm? I don’t know, but the other work that Hawkins has done has done very well for them, so perhaps this will be a new market for them to enter.

He also suggests that the Palm takeover rumors are just that. Unfortunately he follows that up by admitting he didn’t know that a hedge fund had recently bought a 6% stake in the company, so I’m not sure he actually knows anything about the business side of things. Which is interesting and disturbing at the same time.

Then he goes on to talk about Palm OS and the future:

[...]here’s the thing: we didn’t have control of our own destiny for the past 5 years. We didn’t have our name, we didn’t have our brand, and we own our OS. We were struggling to get into the smartphone space, while we were losing our traditional distribution channels. It was a difficult time. While all this was going on, Palm kept growing; and, is still growing rapidly. Although there are lots of competitors, Palm is a very healthy company. We’ve been profitable for many consecutive quarters, years really; and, we’re making lots of money; and, we finally feel like we have control of our destiny back in our hands again.

Now, it takes a little but of time to turn that into products. It takes 2 years to design new products, and so you don’t see this control reflected immediately in the product line. In my view, this is a good time at Palm. In terms of viability, we have lots of cash, we’re profitable, and we’re in control of our own destiny. We haven’t been in this kind of shape in a long, long time.

Now if that isn’t a bold statement, I don’t know what is. I think that he is suggesting, more or less, that their pipeline is empty and has just started filling up since they got their OS back. As far as I can tell that means he is saying 2 more years of releasing the same phone and OS and then perhaps they’ll have an actually new product? This at a time when innovation in the space is really heating up with the release of the iPhone which has catalyzed a ton of new phones and new development. I’m not sure I’d call Palm a company in the best shape it’s ever been.

As I’ve said in other posts about Palm, I don’t think that it is over for Palm - although I know others who think it’s already too late. I believe that it’s getting close to too late for them but if they can actually do something maybe with Hawkin’s new project or maybe somewhere in the wings is a surprise new smartphone, maybe a short term fix is that PalmOS on Win Mob that the handera guy talked about. There’s a few things that could buy them some breathing room to come out with their next company saving thing. I don’t think there’s too much chance of it, given their history, but I still say it is possible.

A buyout could help or hurt. I think a company like Dell just doesn’t help. What are they going to do? They can make it cheaper, I guess, but they aren’t going to be developing anything new or exciting. One interesting possibility is a private equity firm buying the company. They could get rid of everyone who’s had a management role in the company in the past few years and bring in people who actually work. Maybe they name Hawkin’s “interim ceo”, Steve Jobs style (although, now that I know how little he knows about the business, maybe that’s not a great idea or maybe it is). At any rate, the future doesn’t look good for Palm, but who knows, sometimes a company has to be way down and way out before it kicks itself into action, I sure hope that’s the case for this one.

Mar 7th, 2007 · Comments RSS · · · · · Tags: feature · palm