How the Pre could revive Palm's fortunes

It's good, but is it a game-changer for mobile?

Palm Pre

It's easy to be wowed by the Palm's new Palm Pre smartphone and webOS – possibly because our expectations before it was first shown were low. The platform has iPhone-rivalling ambition.

It's fresh and innovative, built firmly around the principles of simplifying people's lives and making technology invisible to the user.

But can the Pre really save Palm? Because it really does need saving. While its iconic Palm Pilots digitised the Filofax and fulfilled an organisational need in the late 90s, Palm's Treo smartphones have found it difficult to compete.

The decline of Palm

According to Gartner's last analysis of smartphone sales by OS, Palm languished in sixth place with a 2.1 per cent share. Symbian led the way with 49.8 per cent thanks to a massive installed base of Nokia phones, followed by RIM (15.9 per cent), Apple's Mac OS X (12.9 per cent), Windows Mobile (11.1 per cent) and Linux (7.2 per cent).

And consider how Palm was viewed before it announced the Pre at January's CES. In December, Palm reported a second quarter net loss of $506.2 million; revenue had nosedived by 45 per cent.

Consequently, the share price had tanked, settling at $1.85. An injection of another $100 million by private equity firm Elevation Partners is currently keeping the company ticking over.

Better than the iPhone?

The announcement of the Pre and webOS at CES certainly gave Palm's shares a boost. Ex-Apple exec Jon Rubenstein and Ed Colligan talked a good talk at the launch and the media buzz around the Pre has been rather good.

In many respects, Palm's pre hardware is better than the Apple iPhone 3G – a slide-out QWERTY keyboard, 3 megapixel camera and replaceable battery (though we'll see what happens at WWDC next week).

It's also a million times better-looking than the current range of Treos and Centros, which cling disappointingly to Palm's PDA heritage.

More impressive, however, is Palm's new webOS. It's Palm's first new OS for 12 years, boasting innovative features like Synergy that its rivals will be keen to rip off. WebOS is also an open platform and new apps can easily be built for it using CSS, HTML and Javascript code. An App Store-a-like 'Palm Catalog' is planned to distribute new software.

The webOS is arguably the highlight of Palm's reinvention. Analysts have suggested that if Palm can't execute its new strategy, there will be no shortage of vultures willing to pick the technology from its bones.

A six-way mobile battle

Palm's webOS is certainly more polished, more advanced than Android. But is there actually enough room for six smartphone operating systems? With Mac OS X, Windows and Linux dominating desktop computing, if we had to bet on the winners of the forthcoming smartphone war, the webOS wouldn't be one of them.

There's no doubt that the smartphone market is poised to explode. Apple has carved out a profitable business with the iPhone, while RIM continues to fight its corner with the new Blackberry Storm and Blackberry Bold.

We've yet to see the best of Symbian (now an open source OS), while Android has perhaps the greatest long-term potential. And, of course, nobody expects Microsoft to sit idly by watching its Windows Mobile market share spiral down the toilet. Windows Mobile 7 is due early in 2010, even if we won't see 6.5 on handsets until the Autumn.

That's not so say Palm doesn't have a chance. Let's not forget that Apple came out of nowhere with the iPhone and has land-grabbed a significant slice of the smartphone market. So Palm certainly has an opportunity to stake a claim. But it's going to have to do it at the expense of RIM, Android, Windows Mobile and Symbian. And it's going to have to be quick.

Selling a technology experience

Like Apple, Palm seems to have grasped the fact that owning a smartphone isn't just about being satisfied with the hardware, it's about buying into an experience and an ecosystem. There are plenty of phones that have better cameras and bigger screens. But UI, usability and versatility go along way to engendering brand loyalty.

Palm's real problem is now timing. The Palm Pre and accompanying webOS have been in development for around three years, during which time Palm has surrendered valuable ground to the other players. But before Windows Mobile 7 lands and Android irons out its kinks (and jettisons its geeky image), there's definitely a gap for Palm to exploit.

This is quite literally 'it' for Palm. The Pre and webOS are an all or nothing gamble. If the positive buzz for Pre isn't followed up by decent sales, then the Palm brand is facing possible annihilation. Elevation Partners won't keep pumping money into it forever.

Crucially, the Pre isn't the leap ahead that the iPhone was over a typical WinMo device. Like it or not, the iPhone sets the pace in the smartphone market. And does the Pre make iPhone owners green with envy? We doubt it, but we'll see what happens as people get their hands on the pre over the coming week.


Now read Hands on: Palm Pre smartphone review

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