Who’s going to buy Palm?


It’s really too bad to see that Palm isn’t doing so well, since they have one of the best- the best, in many respects- smartphone OS on the market. Despite all the excitement in the days immediately before and after the launch of the Pre, sales have not been particularly good, and Palm stock is right back where it was before they dropped the webOS bombshell on the unsuspecting world. Ars has a good article on why that is, and it boiled down to two things:

  • Apps – The first rule when trying to compete with Apple on their own territory is, don’t. The second rule, though, is that if you are going to compete with Apple on their own territory, you have to observe the things people are complaining about vis-a-vis Apple, and improve on them; don’t make them worse. (For example, this is the reason why even fewer people care about the Dell Adamo than about the MacBook Air: the MacBook Air sells for highway robbery prices as it is, and the Adamo is even more expensive. Epic fail in every definition of the term). Palm made the exact same mistake: when people were (and still are) complaining about Apple’s restrictive and obscure app approval process, Palm could’ve swept in to save by the making webOS a completely open development platform (it is based on Linux, after all), but they decided to make the process even worse than Apple’s: the APIs available to developers were lousy, the app approval process was achingly slow, and there was just nothing to get developers excited about a platform that was already way behind the iPhone in terms of installed user base. Talk about shooting yourself in the foot. Then Android came along and actually delivered on the promise of a platform without development restrictions, and that was that. To this day, there are barely 2,000 apps available for webOS, slightly over a hundredth- 1%- of what you can get on the iPhone. That ain’t gonna cut it.
  • Palm’s bizarre advertising – It’s a shame that all it takes to kill the chances of a promising product is crappy advertising, but that’s the way of the world. This is especially frustrating because Palm had most of their work cut out for them: in terms of visuals, the Pre looked better than anything- including the iPhone- on the market when it was released. They just had to show the phone off and let the money roll in. Instead, they opted for those mildly disconcerting adds with the featureless woman emotionlessly doing… well, no one was really sure what she was doing, which was the problem. Palm actually just realized this, and fired their ad agency, but way too late.

With Palm’s revenue continuing to spiral downwards, the rumors inevitably started to swirl that someone would have to buy them out. For a while, Jon Rubenstein denied these, and insisted that everything was fine, but as of this morning the reports coming out say they’ve reached the end of the line: Palm is looking for offers.

Naturally, there’s a great deal of speculation as to who might decide to snap Palm up, assuming the report is even accurate. The current frontrunner seems to be HTC, the Taiwanese company which has exploded out of nowhere (after abandoning Windows Mobile, probably the best business decision of the 2009 year) to become the leading manufacturer of non-Apple desire-inducing smartphones, at least in the US. I see the logic in this, but I also don’t think it’s an absolute: HTC seems to be doing just fine manufacturing phones for Android and Windows Mobile. Nevertheless, it is possible: HTC has been making add-ons and skins for both Android and WinMo, so they clearly have both good programmers and a desire to tune the user experience to be exactly what they want, and having their own operating system would give them just that.

Some people have advanced that buyers might come from companies that already have mobile operating systems: RIM, Apple, Google and Microsoft have all been put forward as possibilities. I don’t think any of these are very likely: RIM’s all-work-no-play corporate culture doesn’t mesh with Palm at all, and Mike Lazaridis seems devoted to his current platform; Apple (and Steve Jobs in particular) would probably rather watch in glee at Palm’s bankruptcy than spend a penny on them, even to get their patent portfolio; Android is doing well enough that I doubt Google needs the help; and Microsoft just makes no sense: webOS’s Linux codebase would be of almost no help to Redmond.

To me, more likely possibilities seem like companies that want to branch into the smartphone market, but don’t have an operating system of their own and don’t feel like adopting Android. Dell and Lenovo both spring to mind: both are computer manufacturers looking enviously at the exploding smartphone market, and both are utterly lacking in the means to develop a nice smartphone operating system themselves. (Can you imagine an operating system designed by Dell? Are you picturing a great deal of grey, and a user experience that drains your soul? If not, you’re doing it wrong.) Lenovo is apparently already working on a mobile operating system, or at least a “platform”, but I can’t see it impressing people the way webOS can.

One intriguing possibility to me is Nokia. On the one hand, Nokia is doing just fine in the cellphone market as a whole: they’re the world’s top manufacturer, after all. On the other hand, their mindshare and market share in the United States is next to nonexistent, and they could really use a smartphone OS with a little more kick. I have never been all that impressed with Maemo: It’s fine for tinkerers and hackers, and people who need very basic smartphone functionality, but its interface is not designed for large touchscreen devices (which are, like it or not, the way of the future) and it’s just plain ugly. It’s connectivity can’t match up to Android or the iPhone either. No matter how hard Nokia tries, they can’t seem to break into the American market, but I think if they bought webOS, and either scrapped Maemo altogether or integrated it into Palm’s offering (they’re both Linux-based, making that easier), and offered some genuinely attractive phones, they may have better luck. Now, this too seems like a long shot: like RIM, Nokia has a corporate culture not conducive to buying a smaller company with the aim of using that company’s IP to scrap everything they’ve developed, but webOS is a great operating system that just needs a company with deep pockets and an ounce of sense to bring it to the masses, and Nokia has both. And they need to scrap Maemo. They need to scrap Maemo so bad.

Of course, the entire story about Palm looking for a buyer could just be heresy, but SEC filings don’t lie: unless something turns around fast, buyout or bankruptcy look to be the only options. Keep your eye on this one as it develops.


2 Responses to “Who’s going to buy Palm?”

  1. I’d love to see webOS on some new hardware and HTC seems like a prime candidate. I wouldn’t say HTC has abandoned Windows Mobile since I think I read they are planning a Windows Phone 7 device. Add in webOS to the mix and they’ve covered all the major smartphone OS bases.

    This would really make HTC a powerhouse against players like Apple and RIM. I think RIM is the one who really needs to step their game up now.

  2. 2 Alex

    HTC hasn’t abandoned Windows Mobile, but they seem to be focusing more of their efforts on Android. Of course, that’s only until Windows Phone 7 comes out, because WinMo at the moment is such a mess. The story has actually updated a little: the CEO of HTC said that they have not ruled out developing their own operating system or acquiring Palm, but he said there are some “variables” he wants to check first. Interpret that how you will, but it’s not a ‘no’.

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