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Palm Impresses at CES But Challenges Remain

Is Palm back in the game?

Industry watchers are excited by the pioneering handset maker's new webOS platform and its Pre smartphone, both of which made their debut this week at the 2009 Consumer Electronics Show in Las Vegas.

But whether Palm (NASDAQ: PALM) can move fast enough to push out more webOS-compatible devices and expand its application portfolio to keep pace with competitors remains a big unknown.

The struggling Centro and Treo maker is wagering that its new Pre handset and its webOS software will kickstart its turnaround after years of slow decline in the face of rivals like Research in Motion (RIM), manufacturer of the BlackBerry line of devices.

Both are already meeting with approval. The Linux-based platform is drawing accolades for its integration capabilities, which enables users to share data automatically with a wide variety of communication applications and online services. The curvy Pre, with a slide-out keyboard and large touch-screen display, provides several navigational tools for quick application access and text input. The name, according to Palm, refers to "thinking ahead for you."

Analysts view both developments as encouraging -- particularly because many see them as Palm's last chance to regain momentum in a market dominated by the BlackBerry and facing new competition from Apple's (NASDAQ: AAPL) fast-growing iPhone.

[cob:Pull_Quote]According to research firm comScore, Palm currently holds 15.5 percent of the U.S. smartphone market, while RIM (NASDAQ: RIMM) leads with 38.7 percent. The iPhone, despite being on the market only about 18 months, has grabbed a 15.8 percent share of the space.

"Palm is back," Avi Greengart, research director of mobile devices at Current Analysis, told InternetNews.com, noting the webOS and Pre both offer some best-of-breed features. "The device user interface is extremely polished, and the concept of integrating multiple data sources on one unified platform is powerful."

IDC analyst Ryan Reith said it is obvious Palm put a great deal of development effort into the mobile platform, which was two years in the making.

"I'm definitely impressed," Reith told InternetNews.com "The OS seems seamless and they've integrated lots of things so that applications are not set off into separate areas as on most devices.

Telecom analyst Jeff Kagan believes the new platform could turn the tide for Palm.

"This could be what Palm needs to breathe life back into its portfolio, as it looks great," Kagan told InternetNews.com.

While analysts agree the platform and device are good attempts at kicking off a rebound, they also believe Palm's got more work to do. One concern is whether Palm can drive innovative applications and more webOS devices into market in a short time.

[cob:Special_Report]Reith said Palm needs to push out more within the first half of the year.

"They need to follow up with a second device quick, and they need to expand into markets such as Europe," he said.

Another key element is tied to mobile applications, which have grown increasingly important as a way to attract new fans and retaining current users. While Palm recently followed Apple's lead in pushing out a new software storefront in December, one strong point of the Pre will be the ease in porting current Palm applications, one analyst said.

Palm's core fans -- a user base that Jack Gold, principal analyst with J. Gold Associates, said has been pretty much sustaining the brand -- won't be eager to upgrade to the Pre if it doesn't provide familiar software, Gold said.

While a Palm spokesperson told InternetNews.com that porting to webOS doesn't present a challenge, Gold doesn't believe it will be that easy.

"It is a big deal and not a trivial issue, as Palm loyalists are invested in those applications," he told InternetNews.com. "At the end of the day, mobile device success comes down to applications."

Greengart, however, isn't as concerned about the porting issue. He noted that Palm users are already abandoning Palm's platform for new devices like the iPhone and BlackBerry products.

The reason, he said, is because those devices are providing better software capabilities. If the Pre proves compelling in terms of software, he doesn't see Palm loyalists having any problem upgrading. Instead, the issue rests in wooing developers to the platform.

"These devices are no longer about talking and texting. Applications are the competitive aspect," he said. "But whether Palm can get developer support behind yet another OS is a big question."