Is Palm Out of Business

For a while “Palm Pilot” was a generic term essentially used to describe all PDAs (Personal Digital Assistant), sort of the way iPod is used to describe all Mp3 players. But today, as smartphones have merged the mobile handset with the PDA, Palm has fallen behind its rivals. It isn’t so much fading away say some, as it is just completely collapsing. How did this happen, what does it mean for business, and is it a warning for other businesses?

First, Palm is one of those companies that was suddenly everywhere. Palm Computing was actually founded in 1992 by Jeff Hawkins, and it did create one of the first PDAs for consumers and business users. This was called the Zoomer and the manufacturing was outsourced to Tandy and distributed by Casio. Interesting enough, it used a third-party operating system, which could explain in part why the device failed. Clearly, here is a case of having too many cooks in the kitchen. But then things got interesting. Palm was acquired by U.S. Robotics Corp. in 1995, which in turn was acquired by 3Com in 1997.

The original founders of Palm, however, were unhappy with the direction that 3Com was taking the Palm brand, and they left and founded a company that really got the ball rolling with PDAs – Handspring. While largely forgotten today, this company managed to make an affordable PDA that many considered the cat’s meow in the late 1990s. The Handspring Visor was one of the first devices to use the (then new) USB ports on the computer to synchronize the PDA with the desktop.

On the business front, what made the Handspring really interesting, as well, is that Hawkins and his partners licensed the Palm OS. So they had the best of both worlds. They had the solid and reliable operating system that they originally helped develop while at Palm and had corporate control at Handspring. Fate played a wild turn, as 3Com spun off Palm in 2000, which in turn merged with Handspring in 2003.

Thus taking the two companies full circle, with Palm eventually having a Handspring line for a few years. The Treo line, which was originally part of Handspring, was also used by Palm. The combined company was renamed palmOne, while the division that made the OS was further spun off as PalmSource. But this wasn’t to last, and palmOne eventually purchased PalmSource’s share of the “Palm” trademark, which cost the former $30 million. A palm by any other name? But this was just one questionable move for a company that seemed so smart.

In 2006 Palm introduced the Treo 700w, a Windows Mobile-powered device for Verizon Wireless. The smartphone was a combination of PDA and phone. In the pre-iPhone days the Palm devices weren’t merely smartphones, these were often described as genius. But was it really worth $30 million for the company to trade under PALM again (as palmOne it was trading under PLMO), especially as another firm (ACCESS) purchased PalmSource, later selling the rights to the source code back to Palm for $44 million. That earlier spin off seemed to be rather expensive.

Another odd move was in late 2008 when Palm’s CEO Ed Colligan announced that Palm would no longer develop non-phone PDAs. This followed the announcement of a new operating system, webOS for the Palm Pre, and an exclusive launch on Sprint. When it debuted last year, the Pre was a big deal for Sprint, but it was hardly a blow-the-doors-off launch that we had seen for the likes of any iPhone launch, or even those for some of the Android handsets. Worse still, the Pre arrived mere days before a new iPhone!

And this brings us to the present day. As of last week, Palm’s stock plummeted 29 percent following lower than expected earnings reports. There are even rumblings that the stock could soon have no value. There are various postings online about why Palm won’t completely die, “The company will live on in some fashion: the product is too good, the engineers are too smart, and the brand still has enough life to attract some attention,” notes Cnet’s Tom Krazit.

But who will invest in Palm? Does Research in Motion, a long-standing rival of Palm, need a Palm-branded BlackBerry? Does Google or Apple? Does Microsoft or Nokia? None of these equations makes much sense. In the old days of auto companies or breakfast cereal, it made sense to have a number of brands that were similar, but in the high-tech world this doesn’t seem to be the case. And as Krazit notes (and anyone who has held a Palm devices after looking at an Android handset or the iPhone will note) the Palm products are dated.

More importantly, as Engadget stressed in a piece titled “Palm: this your survival guide,” covers issues where the company made the wrong twists and turns. Not the least was an ad campaign that spoke down to the audience.

So is Palm out of business? Probably not quite yet, but as far as a handset for business users, Palm is going to have a hard time competing against the BlackBerry. And for those mixing business and pleasure there is Android and iPhone. However, the mobile world is a tricky one; the hole was all but dug for Motorola and an aggressive marketing campaign for the Droid turned things around. 

Finally, AT&T has announced that it will be carrying the Palm Pre. With the iPhone exclusivity looking to go away, the carrier is hedging its bets. The question now is whether the Pre that was overshadowed by the last iPhone launch could do better now on AT&T.