CES 2009: 'Do or Die' Time for Palm?
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While other major technology vendors may be approaching this week's Consumer Electronics Show as an opportunity to show off their latest gadgets, the stakes are far higher for Palm.
Industry observers say it's nothing less than do or die time for the pioneering mobile device maker, which is expected at CES to show off the new mobile platform on which its future may depend.
"Palm is now at a critical crossroads in its existence. It's not yet clear whether it can survive, let alone regain its former luster," Jack Gold, principal analyst at J. Gold Associates, told InternetNews.com. "It has fallen well behind the market with its geriatric Palm OS-driven systems and needs a good kick in the phone to get market share back."
Palm (NASDAQ: PALM) is slated to deliver a major presentation on the first day of CES, being held Thursday through Sunday in Las Vegas. While the company declined to reveal any information about its contents to InternetNews.com, it's a likely introduction for one of the company's key launches planned for this year: A new Linux-based mobile OS, reportedly called Nova.
Few details have been revealed about the new platform, which has been in development for two years, and which industry watchers say Palm needs to nail if it's going to regain market share.
A success from the new OS couldn't come at a more urgent time. While the struggling player received a much-needed $100 million infusion from Elevation Partners last month, it has been steadily losing traction to newcomers such as Apple's iPhone and leaders like the BlackBerry.
According to research firm comScore, Palm currently holds 15.5 percent of the U.S. smartphone market, while Research in Motion's (RIM) BlackBerry portfolio leads with 38.7 percent. Apple's (NASDAQ: AAPL) iPhone, despite being on the market only about 18 months, has grabbed a 15.8 percent share of the space.
Palm hasn't been idle during that time, however. The company experienced 47 percent growth from September 2007 to September 2008. In 2008, Palm debuted an unlocked Centro, new Google map applications, and two high-end smartphones, the Treo 800W and Treo Pro.
Yet, according to comScore, it is still underperforming in the smartphone category as a whole, given that the market grew 106 percent in the 12-month period ending in September.
The new product launches also did little to help Palm's financial outlook. While it reported better-than-expected revenues of $366.9 million in the third quarter -- above analysts' estimates of $329.9 million -- it also reported a net loss of $41.9 million.
[cob:Pull_Quote]Yet there's also thought to be a lot of room to grow for vendors of smartphones, which currently represent only a sliver of the overall phone market. At present, 1.4 percent of all U.S. mobile phone subscribers have a Palm device, while 3.4 percent use a BlackBerry, 1.2 percent are iPhone users and 3 percent have a Windows device, according to comScore.
Palm hasn't released any official details on new devices for 2009, but several tech bloggers are reporting rumors that one new handset will offer a sliding QWERTY keyboard hidden under a touch-sensitive display.
Gadget site CrunchGear, citing a trusted source, reported earlier this week that the device will be "iPhone-like."
But analysts believe it will take much more than merely aping Apple's design aesthetic for Palm to regain its footing.
[cob:Special_Report]"This really is Palm's last chance to come out with a compelling, competitive platform," Gold said. "That's sad for a company that virtually invented the smartphone, but it is the reality of the current market which has seen some highly compelling platforms."
With the replacement for its proprietary platform, Palm, which also makes Windows Mobile-based devices, will need to deliver a robust OS that goes beyond the iPhone's polish and BlackBerry's software capabilities, analysts said.
"If it can do that, it would have a major industry impact, as consumers are expecting to do more on their phones than just talk and text," Avi Greengart, research director of mobile devices at Current Analysis, told InternetNews.com. "Palm needs to give consumers and developers a reason to favor a new platform and device in a market rife with strong competition."
Telecom analyst Jeff Kagan said the new OS may have the potential to provide a compelling reason for users and developers to jump onto the Palm bandwagon.
"It is supposed to be something for the business user and for the consumer," Kagan said. "If it works as well as it sounds Palm could have a winner and be a wild success."
But, if it doesn't, then tomorrow could easily mark another milestone on Palm's road to becoming a has-been, Gold said.
"It is very clear that they have little time to waste," he said. "If this OS is not a compelling competitor to the myriad of new-generation platforms already in the market, it will be Palm's swan song."
"That would be a sad ending to a pioneering company," he added.