Phone
Instead, the company is in danger of going the way of its 1990s Palm Pilot, making it the latest innovator to learn that great technology and an accomplished leader dont guarantee success.
Several analysts say Palm Inc. might not remain an independent phone maker for more than a year or two. It just could be too late to stop the momentum enjoyed by Apple Inc.s iPhone and Research In Motion Ltd.s BlackBerrys – not to mention a growing crop of phones running Google Inc.s Android software.
Palm spokesman Derick Mains said the company had no comment.
Consumers have gravitated toward smart phones for their versatile features, such as Internet access and applications that can be downloaded. One out of six U.S. adults had a smart phone last year, according to Forrester Research.
But Palm – a leader in the early days of handheld computing – was slow to adapt. It began fighting back in earnest in January 2009 at the International Consumer Electronics Show. It unveiled the stylish touch-screen Pre and webOS, software that allows Palm phones to do something the iPhone cant – run multiple apps simultaneously.
Ed Colligan, who was then Palms CEO, said at the time that the new products somewhat marked a relaunching of Palm itself. But it hasnt gone as smoothly as Palm hoped.
Palm released the Pre last June, for use on Sprint Nextel Corp.s wireless network, and followed it in November with a cheaper model, the Pixi. Verizon Wireless started selling upgraded models of these phones in January, and AT&T Inc. plans to offer webOS phones later this year.
Despite widespread availability and positive reviews, consumers havent really embraced the products. Palm sold 810,000 phones in the quarter that ended Aug. 28. In the next quarter, sales fell to 573,000. And Palms latest report, due March 18, is not expected to be bright. Palm recently cut its forecast for that period, citing sluggish sales.
Discouraged investors have sliced the companys stock price by more than half since the Pre hit stores. In that same time, shares of Apple have risen nearly 50 percent to all-time highs, while RIM shares have fallen 11 percent.
One big problem for Palm is standing out in a crowded market dominated by Apple and RIM. Many analysts believe Palms latest products are good, but the company simply hasnt been able to make potential customers realize this.
Not for a lack of trying: Palm spent $74.1 million on sales and marketing in its last reported quarter, up 64 percent from the previous year.
Verizon and Sprint have advertised the Pre and Pixi, too, but now probably arent doing it as aggressively as they would if they had the phones exclusively.
For a larger phone maker such as Motorola Inc., in the midst of its own comeback attempt, an advertising blitz might not be such a big deal. But Palm is much tinier than its key competitors. It takes Palm an entire quarter to sell as many phones as Apple sells in a less than a week. RIM spent six times as much on a category it calls selling, marketing and administrative expenses in its last quarter as Palm spent on sales and marketing.
One thing Palm has: a CEO who helped make Apple what it is.
Right before the Pre launch, Colligan was replaced by Jon Rubinstein, 53, who spent a decade at Apple during its own comeback run. He started in 1997 and was a pivotal figure behind the brightly colored iMac computers and the iPod.
He came to Palm in 2007 as executive chairman under a deal in which Palm sold nearly a third of the company to private equity firm Elevation Partners.
Still, even the most astute leadership isnt enough in such a competitive market, Canaccord Adams analyst Peter Misek said.