Palm Shutting Stores in Reshuffle

Palm Inc. is closing down its retail stores as part of a business strategy reorganization that the Sunnyvale-based phone maker hopes will shore up its standing in the competitive smartphone market race.

While the decision will clearly impact direct-to-consumer sales, a Palm spokesperson said the decision should not impact its business enterprise strategy.

“Palm has always and will continue to have a strong corporate enterprise strategy,” Palm told in an e-mail. Citing its separate enterprise sales team designated to the market, the vendor also noted its “strong” relationship with Microsoft.

“The closing of the stores will not have a direct impact on enterprise users. On the consumer side, Palm’s done really well, especially with the introduction of Centro and we expect to see that success to continue.”

Palm products will continue to be sold through carrier stores, select resellers and other retail and online channels as well as through Palm’s online store.

In the announcement released on Thursday, Palm said it would “continue to focus our company around core business initiatives and are consolidating more resources behind fewer programs in order to compete most effectively and build world-class, category-defining mobile solutions. We have therefore made the decision to close our retail stores.”

According to Palm’s Web site, as of March 2007 8,000-plus organizations have standardized on the Treo smartphone and 40 percent of the Fortune 1000 companies use the devices.

Palm’s store decision is a continuation of dismal financial news coming from Palm during the last year, with intermittent rumors about Palm being acquired.

In addition to the store closings, Palm’s also closed the door on a nagging class action lawsuit related to Treo repair complaints. Buyers who bought the Tree 600 anytime after September, 2005 are eligible for a $75 rebate. Treo 650 owners can apply for a $50 rebate. Rebate forms, which must be postdated by July 28, 2008, are available here.

Palm’s news ended on a dour note by day’s end, as its stock was clearly impacted by both announcements. It closed the day at $4.86, just about 3 percent, after dropping as low as $4.81 at one point during the trading day.

Gartner Research Director Mike King said he doesn’t even see an opportunity for Palm to rebound as a strong smartphone competitor. “They haven’t done a great job growing market share or keeping carriers. They’ve lost their cachet,” King told

King said Research in Motion’s BlackBerry, Apple’s iPhone, HTC’s Windows mobile devices and Nokia smartphones are all outselling Palm at this point. Still, he doesn’t see an acquisition in Palm’s future at this point.

“I could see Motorola coming in as they could grab a decent platform to build a good smartphone device but then again, Motorola’s got enough problems of its own to handle right now.”

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