Palm Prime for Acquisition
Palm is reporting dramatically lower sales of its WebOS-based smartphones. It seems the once-dominant maker of PDA's has nowhere to go but down and its plummeting fast, making it a potential target for acquisition by a smartphone competitor.
Fri, March 19, 2010
PC World — Palm (PALM) is reporting dramatically lower sales of its WebOS-based smartphones. It seems the once-dominant maker of PDA's has nowhere to go but down and its plummeting fast, making it a potential target for acquisition by a smartphone competitor.
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Palm announced that it sold a meager 408,000 smartphones in the most recent fiscal quarter. That figure is less than 5 percent of the number of iPhones sold by Apple in its most recent quarter, and represents a 29 percent drop in sales from the same quarter a year ago. The outlook for Palm is bad, and getting worse.
In the most recent report from comScore, Google's (GOOG) Android operating system gained 4.3 percent market share, leapfrogging Palm and relegating WebOS to last place with a 2.1 percent drop in market share. With RIM lagging but still dominating market share--the smartphone battle right now is between iPhone and Android, with Microsoft's Windows Phone 7 a potential dark horse entry later this year.
When Palm launched the WebOS-based Pre smartphone last year, it was hailed as the first device capable of challenging the iPhone. Its performance in the market have been disappointing, though, certainly not living up to the hype and expectations.
Many still feel that WebOS is not only a capable smartphone platform--but a superior one. Unfortunately for Palm, being technically superior never trumps superior marketing. Just look at the history of superior technologies that are now extinct: the IBM OS/2 operating system, Sega Dreamcast game console, Betamax video tape players, and HD DVD. Marketing beats technology every time.
Palm can't rebound by being evolutionary. Getting back in the game and mounting a serious challenge for smartphone market share would require something revolutionary at this point--and I don't expect there are any such tricks up Palm's sleeve. RIM and Apple (AAPL) are solidly in the lead, and Palm can't compete with the marketing clout of either Microsoft (MSFT) or Google.
The Palm Pre initially launched only with Sprint (S), but it is now available from the leading wireless provider in the United States--Verizon--and (VZ) AT&T has announced that it will add WebOS-based smartphones to its portfolio later this year. The broader exposure is good, but Palm's smartphones still have to compete against devices like the iPhone and the Motorola (MOT) Droid. The only thing that would really spark the platform is if they started giving them away, which might win back some market share, but lose a ton of revenue in the process.
