How the mighty have fallen. Once a pioneering leader in handheld computing, the smartphone market has not been kind to Palm Inc. Palm’s latest quarterly loss means the company is heading for its third year of losses in a row.
As ZDNet’s editor in Chief Larry Dignan points out, Palm now finds itself in a viscous cycle.
” Sales in the third quarter were weak. So weak that Palm’s sell through in the third quarter was 408,000 units vs. a sell-in of 960,000 units. That means Palm seriously overestimated demand for its devices….Now Palm will have to discount, take charges for inventory and suffer a gross margin hit to lower the inventory of Pre and Pixi devices.” (ZDNet 19/03/2010)
So just how bad are things looking for Palm?
Investors appear unimpressed and seem to have taken a dim view of the future.
After rebuilding it’s share price during 2009 on the back of a new OS and hardware, Palm’s share price seems to have peaked not long after the launch of the Palm Pre. The launch of the Pixi in late 2009 appears to be correlated with a slight resurgence in optimism, but it’s mostly been downhill since then and the latest results haven’t helped.
So what does the future look like for Palm? Well – rather tough. The latest Comscore data shows Palm’s share of the smartphone market is in decline.(1)
Is there really no place in the market these days for Palm? is there no niche left for it to fill?
RIM is bunkered down in the business market, and has started sending out its Storm troopers on raiding parties in to the consumer market. Apple is the ‘cool thing’ for the i-generation and those that like a simple experience that works. Microsoft’s mojo is fading, but it’s got the new Windows Phone 7 coming later this year, and it has the advantage of being on handsets produced by more than one manufacturer. Bubbling along in the background is Nokia with it’s Symbian and Maemo based phones.
Then there is Android. After a slow(ish) start, Android seems to be gaining traction on the back of the Droid and Nexus One. Like all things Google, Android looks like it will be everywhere, turning up on handsets and netbooks from a range of manufacturers. The coming army of Android based device might become the default smartphone for the rest of the market simply due to the breadth of handsets choices.
Which doesn’t really seem to leave anywhere particularly well defined for Palm.
With a heritage in handheld computing, getting in to tablet computing might have been an option for Palm – had it started down that path at the same time it began developing the Pre. But the tablet market is as crowded as smartphones and shares a lot of the same competitors. (Apple, Google, Microsoft in OS, with PC vendors in place of handset vendors in the hardware space).
Maybe Palm’s management is happy to be a niche player in a growing smartphone market? Maybe the current strategy will turn out to be a winner. But unless its shareholder see things the same way, there could be turbulent times ahead.
(1) Gartner data for smartphone shipments in 2009 tells a similar tale of woe for Palm.