Reading Palm's fortune: Does its life line now lead to glory?
It's a question worth asking: With the Pre looming upon the horizon, is this the same Palm we were talking about only 48 hours ago -- the Palm that was very near to being buried in the desert and fed upon by vultures?
The Pre is a tremendous device, but let's not forget that it has to get here. Sprint and Dan Hesse need to deliver on their promises of delivering a network for this device, and consumers might not have an easy time picturing those 10,000 guys in red and grey coats with service trucks and helicopters, standing behind them wherever they go, when they think of "Sprint." And Palm as a company is in very bad shape. Yes, it may have designed the product of the year, and it could very well have one-upped the iPhone -- we'll see. But Apple had a healthy business infrastructure going for it two years ago at this time, and it's even much healthier now, stock price notwithstanding. Palm is another affair.
We asked our contributor and former Gartner analyst Sharon Fisher to do some Palm reading for us, and remind us about where this company came from and how it got to this point, before the glamour of an exciting product clouded our view of the past.
Over the past couple of years up until last Thursday, the reports on Palm had developed a "General-Francisco-Franco-is-still-dead" morbidity. The seminal personal digital assistant company has seen itself passed by with products such as the BlackBerry and the iPhone, and has itself struggled with a long line of botched product launches and decisions. Until quite literally a couple of weeks ago, the company's eventual fate seemed to be just a matter of time.
It's hard to pinpoint a particular beginning, but certainly there were a number of issues in 2007. Rumors spread in March that Palm would be acquired, possibly by Nokia; nothing came of it. The company had planned to release a Linux-based laptop called Foleo; it dropped the project in September. Then, in response to revenues $30 million less than expected, in December 2007, it laid off 10% of its employees.
Things didn't improve in 2008. Palm closed its retail stores. The company released its low-cost Centro, which sold more than a million units, but which cannibalized the sales of its higher-priced Treo, further decreasing Palm's revenues.
Near the end of the year, news came faster. Palm announced a $100 million investment from VC firm Elevation Partners (after the company had made a $325 million investment the previous year), a 20% cost reduction, and an $80 million quarterly loss, and a sales drop for its Treo smartphones by 13% annually. BusinessWeek estimated that the company had just "two quarters' worth of operating capital" remaining.
Yet many industry watchers still seem to hold out hope that Palm will be able to pull it out with this announcement. "D-Day is less than a fortnight away, Palm," said the Motley Fool on December 29, noting that where Go, IBM, and Microsoft had failed, Palm had succeeded. "You've got till then to show us something brilliant. If you don't, then it's likely game over. And none of us wants that."