Palm: Likely to stumble with Pre

William Hurley
04 Jun 2009

On June 6, Palm will release the Pre, a smartphone many hope will fuel a resurgence of a company long since fallen from grace. But numerous miscalculations and missteps endanger this hoped-for turnaround.

A once-proud Silicon Valley icon, Palm has been hyping the Pre since January\'s Consumer Electronics Show in Las Vegas. There\'s been much cause for optimism that the Pre will live up to its hype. Demand for smartphones is on the rise. The number of smartphones sold in the first quarter rose 12.7%, to 36.4 million, even as total cell-phone sales declined, according to research released in May by Gartner (IT).

Palm hosted an impressive debut of the Pre at CES. And at the outset, the company made an attempt to court a community of software developers who would be at the forefront of creating all manner of rich applications that will make the Pre both useful and fun to a range of buyers.

Palm\'s development delays

I should know. I led early attempts to organize and rally the community. Our flagship event, preDevCamp, drew together roughly 1,000 volunteer developers in more than 85 cities around the world. Before those efforts could come to fruition, it became apparent to me and other leaders that Palm\'s early enthusiasm for the community was halfhearted at best. I and some of my associates ultimately parted ways with Palm after a series of events that has been discussed at length elsewhere. I won\'t rehash it in detail here, but ultimately we didn\'t believe we had the backing from Palm we would need to ensure success.

In fairness, one of Palm\'s senior vice-presidents has posted a blog stating the company\'s support for preDevCamp. But remember that Palm\'s developer network has been largely dormant for three to four years; not immediately embracing its reinvigorated efforts is shortsighted and will prove costly.

The chain of events caused me to step back and look at Palm in a new light, but my concerns about the success of the Pre relate to far more than the company\'s treatment of developers.

More Pre problems

Let me start with the competition. With its juggernaut iPhone, Apple more than doubled its smartphone market share in the last year, moving to 10.8% in the first quarter from 5.3% a year earlier. And Apple is hardly Palm\'s biggest rival. Research In Motion\'s (RIMM) BlackBerry made an equally impressive jump, now commanding 19.9% of the market, up from 13.3% a year earlier. And even though Nokia\'s (NOK) market share shrank, the Finnish manufacturer still commands a healthy 41.2% of the smartphone market, according to Gartner. We haven\'t heard much from Nokia lately, but it no doubt has turf-defending plans.

For consumers, there\'s likely to be disappointment with price. The Pre starts at $199, after rebates and a service plan"”almost exactly what the iPhone costs through AT&T. If you can afford to spend $199 on a phone in this economy, would you purchase a phone that\'s been in the marketplace for two years, has sold more units than the Motorola (MOT) Razr, and is supported by tens of thousands of available applications, or would you purchase an unproven phone from a company teetering on the brink of extinction, or at least irrelevance‾

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