Palm's Road to Nowhere — Is It Really Worth $1B?

42 thoughts on “Palm's Road to Nowhere — Is It Really Worth $1B?”

  1. Bravo, Om. Unless there is some magical value in their IP portfolio – why would anyone buy them? Surely not for hardware capability, HTC and Motorola each must be as good. And surely not for WebOS, either – how could any Smartphone OS be good enough to rise above the current batch? That is not to say that WebOS isn’t terrific (I have no idea) – but the market is already over-saturated.

  2. I think HTC buying Palm is a very big threat to Android and a decent shot at a mass-market, cheaper competitor to the iPhone. HTC sells a lot of phones, and Palm O/S is a great O/S constrained by substandard hardware. Put the Palm O/S on HTC phones and you immediately have something that from a consumer perspective is better than Android, and that from a developer perspective starts to have a sizeable enough audience to be interesting.

    1. Hi

      I am one of those people who actually feels that Htc has more to lose than gain from webos. Their whole value proposition is the htc user interface on top of any generic operating system. — windows or android for that matter. Also palm is a huge distraction for a company that is clearly executing very very well.

      1. Meh, you’ve dumped on Palm pretty consistently, Om, in good times and bad (what did they ever do to you?), so why should we care about your opinion now? In fact, had I listened to you, I wouldn’t have made the money I did investing in Palm back in the winter of 2008.

      2. The other big gain for HTC is to eliminate dependency on outsiders – with their own OS, they can likely innovate faster than they can working with Android where even the big guys are dependent on Google (and where Google has demonstrated at best indifference and at worst nastiness toward developers – we’ve certainly experienced it). So instead of having 4 or 5 different platforms, over time they can converge toward one.

      3. Om: With Windows Phone 7 (WP7), HTC will not be able to layer their UI (Sense) on top of the OS as MS prohibits that as of now. That will leave HTC to try to differentiate their WP7 phones via hardware designs only, or to fight the masses of other manufacturers using Android.

        I think you’re not seeing HTC’s “whole value proposition” the way that Peter Chou and Co see it. We don’t see HTC in the top 5 of mobile phone marketshare, and they won’t get there using commodity software platforms only. Sure, I’ll grant that they only want to play at the high end, so they’re not really competing with Samsung and LG.

        Look at HTC’s evolution over the past 12 years from OEM to ODM to now burgeoning software powerhouse. Their own OS is coming….the only question they have to answer is “build or buy?” And there may never again be such an opportunity to buy a solid base OS plus an attractive patent portfolio for under $2B.

      4. Om, HTC might be executing very well in terms of money. But they have no control over the mobile world as they do not own any operating system. Microsoft shut them from Windows mobile 7 customization. They have to depend on Google, which is only there to make money on Search/advertising. HTC is probably the best hardware manufacturer ( better than APPLE) out there. And their software team is good too. Buying PALM would be the best thing that can happen to HTC. Samsung is making Android phones while promoting its own BADA platform.
        http://www.bada.com/
        So why not HTC ? You might disagree, but the fruit of the merger will be a phone everyone will be waiting for.

    1. Manoj

      Mozilla is not a corporation and instead is a not-for-profit group. Also, They are doing well because they actually make a product people want — firefox. Palm on the other hand is just a company riding it past reputation but not being able to turn things around.

      1. I don’t understand your logic here..over 90% of perpsectives I’ve read about webOS in comments sections on engadget, gizmodo and even here say webOS is comparable or BETTER than iphoneOS…people like webOS, they don’t like the hardware webOS is on. If HTC can provide a great form-factor with Palm’s software who wouldn’t want it?

      2. jbrandonf, I’m more inclined to agree with you: http://gigaom.com/2010/04/12/buying-palm-would-thrust-htc-into-the-smartphone-spotlight/

        I loved the webOS features — although other platforms are catching up in some areas — but the hardware was just OK. Unfortunately, without sales, developers don’t seem interested and that’s why I left Palm: not enough apps for what I need to do on my phone. I agree with you that HTC’s hardware expertise along with webOS would simply rock. But would it rock enough to attract programmers?

    2. The really discussion about any of these platforms is not about what they had in the past or even what they have today. It is about whether or not the platform will be a source of innovation going into the future. This market is clearly NOT standing still. Today’s WebOS is tomorrow’s also-ran without investment and an ecosystem. Apple, Android, and Nokia have huge investments and huge ecosystems. Palm cannot compete and HTC buying them won’t help. There is no way that the necessary technical work to even keep up with these other three could be made. Heck, even Microsoft is failing to make sufficient investments in their platform (and has almost completely failed at ecosystem development).

      Increasingly manufacturers like HTC will have to rally around open platforms in order to be on a bandwagon that encompasses all of the innovation in the devices we’ll be using in 5 years, not tomorrow. Palm may be valuable for a brand name that is, while tarnished, well recognized in the US. Maybe a few patents. But I’d be surprised if the lot was worth more than a few hundred million. And think of the outstanding liabilities! You’d have to leave the current entity as a bankrupt shell just as a placeholder for all of the long term consumer liability and potential commercial claims against the company. So this will be an asset sale, and a wind down of a shell company by Elevation Partners.

      Sad end.

  3. Om, Palm’s current position is simply due to strategic error. They lacked a clear plan hoping instead that “If you build it, they will come”. No firm is going to consider Palm as an investment based on repeating this strategy. What they are going to consider, however, is their technical expertise. And when it comes to that, there is a lot to value in the company.

    I fully expect that behind the scenes there’s a bidding war. And, just like Conan on TBS, I expect many of you in the media to be will be surprised. I just hope they choose the right suitor.

  4. Om, Palm did a fantastic job on the software. May be you should have used a Pre for your main phone. The issue really is with the money. With few millions left, they faltered at marketing the phone resulting in few sales. Folks at wall street punished the stock. All palm need is another round of investment or a sale. Regarding sale, it is probably the smartest strategy for any other company. Whoever buys palm get to own the patents. They get the WebOS and the team behind it. Mostly importantly, all the 50K gaming apps that Steve Jobs boasts rivaling Sony /Nintendo can be ported to WebOS with relative ease.

    OTOH, I have a question.Why would Vodafone,SFR and ATT , few of the worlds biggest cellular carriers are signing up palm phones ? Do they think Palm will survive ?

    1. If money was the solution, why wouldn’t elevation put more money into the company. Sure they Have a nice OS but that doesn’t mean they should be worth a billion dollars.

      On your other question — carriers have nothing to lose in this game and are happy to offer palm. If pre demand takes off, then they win. Otherwise it is palm’s problem.

    1. HTC already has a multipltform strategy and counting Brew and winmo7 and 6.5 supports 4 different platforms.

      Android is good, but with NexusOne you never know what will happen to device makers on it, google seems to be pushing towards vanilla experiences instead of sense like experiences because of fragmentation.

      Windows Mobile 7 has removed all possibility of customisation.

      Moving forward and seeing longterm, the software makers will win and HTC will become commoditized.

      Having you own os, and at that the best os which is not an iPhone is a great asset. If you can support 4 platforms, you can support 5 platforms …

      1. Nexus One among others was made by HTC. A weaker competitor like Huawai (so far only big in nameless 3G USB modems with utterly bad software ;-/) may profit more from Palm, but stronger vendors like HTC probably have more money.

  5. Your reporting on Palm has always been Salient. The company is a strong phenomenon in Silicon Valley but has always been muted outside of the bubble.

    Being married to an also-ran CDMA carrier like Sprint is part of the problem, sure, but the company’s consistently poor execution in marketing is a far more concerning. They’re geeks who only know how to sell to other geeks.

    1. Blaming Sprint for Palm is a tired theme, Ian. How do you figure? Is CDMA the problem? Verizon and Sprint (both CDMA) have about 54% of US subscribers. Is Sprint too small? Maybe, but they have about 42% more subscribers than T-Mo. Would AT&T have stewarded the Pre better? Hardly, they were far too busy selling a zillion iPhones. Sprint has their problems, but short-changing Palm wasn’t one of them.

      Palm was MIA for years, and then released an (apparently) great phone two years after the original iPhone, and 3 months before the iPhone 3GS. That is some very unfortunate timing.

  6. Ouch.
    I have long suspected that HTC will buy Palm — for the nameplate here in the US and for the prestige of acquiring them back in Taiwan.

    Probably not quite worth $1 billion, including the cash.

    It will be interesting to see what smartphones HTC develops with the (rumored) Windows mobile OS given how slick their Android phones are.

  7. Om, I agree with your comments and I really do not see any value in Palm against the competition who have doen an excellent job in market penetration, utility and market share.
    Perhaps they should look at a lighter version of the Pre and aim it for the emerging markets where the likes of iPhone is seen as too expensive and elite. India comes to mind

    1. Nokia is way too strong here in India while Palm is a relatively unknown entity. Given similar price points (Nokia can play low cost games with volumes), people would prefer Nokia over Palm. Unless Palm can get some solid operator deals, they might actually see themselves spending a lot more to establish in India. (Carrier deals have just started to take place here; Indians normally buy their Phones and SIM cards separate).

      1. Nokia is strong here just because the other smart phones are priced crazily here.

        Carriers for all practical purposes are a dump pipe (And thats awesome) so no subsidy.

        An iPhone costs 99$ in the us. Those phone go for 650$ in India. No wonder they have failed.

        Nokia cannot compete with a reasonably priced palm, because they have got shitty software. Palm doesnt – simple. Even RIM is making huge roads into the Indian market with great reasonably priced phones. So Nokias dominance in the smartphone space is and will be under serious threat.

  8. Om,

    Minor correction: Palm did not envision or develop the Treo (at least not initially) – Handspring did. In fact, Palm has been unable to articulate a compelling vision at all without Jeff H & Donna D. That’s been their problem for a long, long time, and as one of the original and most successful PalmOS developers I could tell you many stories concerning complete lack of imagination, vision, and leadership that permeate the organization.

  9. Om, you neglected to mention the implosive combination of a vain investor like Roger McNamee fused with a DOA company like Palm. Anytime you see investment professionals spending media time with celebrities — let alone put them on their investment team, well, that’s a sell signal if I ever saw one.

    Turnarounds are serious, tough business. They’re not for wannabe rock stars with their rock star friends pretending to be investors.

  10. Palm is dead.

    The only worthwhile part of Palm are the patents – if they are still active, and if they are relevent.

    Given how long Palm has been in the market, no doubt some of those patents are worthless.

  11. The proverbial hockey puck is going to an unified Apple approach. Can you really trust Google once Android gets huge, that they wont just step in and want control of the whole thing like what Microsoft did with the Zune? Customization on windows phone 7 is dead leaving HTC few options but to get there own software platform. HTC is a much better company than just a makeup artist for Android. HTC DON’T MESS THIS UP GO AFTER PALM AND SHOCK THE WORLD. ANDROID FANBOIS WILL UNDERSTAND.

  12. I think Palm needs to redefine themselves.. slim down. Look at other model – like licensing their technology. They cannot compete anymore in the platform war. Thus I dont know what Motorola or HTC would gain my aquiring them.
    My view is this first of the few calamaties we are going to see with platform gravitation.

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