Analyst roundtable reunion: The last remake of Palm

Though the news is relatively fresh that Palm Inc. has been negotiating with China's Huawei Technologies about a possible buyout, the word from Investors' Business Daily sources is that these negotiations have actually been ongoing for at least two months. That nothing has come of them since February may be the most important, and potentially distressing, news of all.

In light of that realization, Palm is suddenly in need of yet another comprehensive makeover to save its flagging image. Suggestions from the field include relatively simple ones from Betanews contributor Carmi Levy -- that it should keep its Pre Plus and Pixi Plus hardware, and focus on building up its applications base -- and the completely opposite suggestion from widely respected industry analyst Dr. Gerry Purdy, who has published his viewpoints on mobile technologies in what's now called the MobileTrax newsletter, since 1986.

In a stunner of a report this morning, Dr. Purdy suggested that Palm's next comeback include dumping its platform's current form factors, in favor of one with a wider screen and keyboard, and with a very familiar brand:
"Drop Pre. Bring back Treo. It's a known brand. It represents everything good that Palm did for years to lead the SmartPhone market," he wrote. "With this branding, we could all then say that the 'Pre' was the 'Precursor' to the return of Treo. Plus there's a new definition for the three key service elements in Treo: 1) phone, 2) apps, and 3) services such as social networking."

Dr. Purdy went on to suggest that Palm partner with a major player in the field, one of Lenovo's or Motorola's or Nokia's standing. Then it could wipe the slate clean for its renewed Treo brand, purge the webOS from its systems, and deploy a remodeled form of MeeGo, the Linux derivative formed from the merger of Intel's Moblin with Nokia's maemo. Using that as a launching pad, he suggested Palm then launch an apps store for MeeGo apps to compete against Apple -- something which Intel has said MeeGo would permit individual vendors to do.

"There are a lot of excellent assets at Palm. They have a great team (investors, board, management, staff & partners). They have a successful history," the MobileTrax analyst concluded. "To many, they still represent the notion of ease-of-use that enabled the Treo to succeed so well in the market. These assets need to be preserved before they slip away."

The precedent for some of what Dr. Purdy suggests was set in September 2005. At that time, in its biggest attempt to date to remake itself and to rediscover relevance against the surge of BlackBerry devices, Palm found a partner in Microsoft. It would build Windows Mobile 5 devices under the Treo brand. Up to that point in time, Treo had been the vehicle for the Palm OS that the company had just sold off to a browser maker in Japan called Access.

On the week of that announcement, I covered the story for Tom's Hardware with an analysts' roundup. Anyone who knows that old publication, as well as Betanews, knows all the participants. First to proclaim the imminent death of Palm OS as a result of the Microsoft deal, was a certain Info-Tech Research analyst.

Carmi Levy, September 27, 2005: The most obvious early casualty of the Microsoft/Palm and Intel/RIM announcements is clearly the Palm OS. PalmSource, which stumbled in delivering version 6, now finds itself fighting an uphill battle to convince its former owners -- and the mobile/wireless market in general -- that Palm OS will remain relevant in the middle of these powerful new hardware/software/carrier alliances. Frankly, I don't see that happening. The market has already voted with its feet: Palm OS-based devices are in freefall, and the conditions are such that this trend will not be reversed.

Palm OS as we know it is dead. PalmSource has announced plans to base future revisions on a Linux core. While this may help the firm carve out a low-end niche, its long-held hope of appealing to the enterprise market is now history. IT's needs are being -- and will be -- nicely met by the remaining players.

Speaking with Betanews today, Carmi essentially said Palm's problem now is a magnification of Palm's problem then. The hardware isn't the tarnished part, but the brand.

"Palm's salvation will not be new and improved hardware because success in this market is no longer decided by who has the best phone. Palm could introduce the world's best mobile phone tomorrow and it still wouldn't change the company's fate," Levy told us. "Encouraging the company to built a successor to Apple's App Store is like telling an on-the-ropes automaker like Chrysler to build a hybrid that delivers better mileage than Toyota's Prius and a more engaging driving experience than a BMW. Palm can't simply conjure up a magically successful online app store -- indeed, its initial effort has been a dismal failure because developers won't commit to a platform with a questionable future. Palm is out of options in this regard."

Disagreeing directly with Carmi in 2005 was none other than Dr. Gerry Purdy, who made the case that selling off PalmSource to Access was necessary for the Palm OS' survival:

Dr. Gerry Purdy, September 27, 2005: I don't think that Palm is getting squeezed out. I do think that PalmSource will migrate itself to become a value added services layer on top of Linux which will become the dominant OS in the 3G phone market. What happened is that the OS has become less relevant in the wireless handheld world but value added services has become more valuable. It was actually very wise for PalmSource to acquire China MobileSoft as that gets them into the Linux game and then Access was smart to buy PalmSource because it allows their browser technology to expand outside of Japan into the Linux world as well.

What does all this mean? I think you'll see Palm become a major handset manufacturer in the wireless handheld space using Access as their supplier of Linux and the value added services (such as user interface, core applications, file management system, Web access browser, content delivery, etc.) for their broad 3G offerings that will work on multiple carriers.

Next: Ross Rubin weighs in...and where was Joe?