Rick:
Palm already has an unlimited access plan, but it's $44.99/month to Palm.net, a price that will undoubtedly come down as the subscriber base increases.
In the Q1 CC, Bruner said that while the Palm VII/Palm.net operated as an ISP, in the future they see Palm partnering with ISP's (like AOL) to generate a continuing ASP revenue stream from Palm owners, and while this would be a lower revenue/sub than Palm.net, it would be higher margin revenue (since Palm isn't operating the service). They saw at least 1/3 of all Palm owners generating a recurring revenue stream within 2 years. 100% of Palm VII owners are providing this type of revenue through Palm.net right now, other Palm owners will be split between Palm.net and other ISP's like AOL. Clearly Palm won't get $20/month for every AOL sub using the Palm platform to access AOL services, but there'll be some revenue sharing between Palm and AOL.
The $149 M-100 is aimed squarely at the consumer market, which includes this huge AOL subscriber base, particularly the younger end of the market which comprises a big chunk of the AOL/ICQ user base. When the M-100 connectivity kit becomes available and these young people realize they can chat at any time to their friends from anywhere, watch sales of low end Palm OS equipped PDA's and cell phones explode. Plus all kinds of personalized revenue-generating services can be piggy backed on to this kind of arrangement, as shopping mall operators, stores, movie houses, restaurants, etc. all realize they can target mobile PDA carrying consumers. It's no accident that AOL has an equity stake in Palm.
We may (and IMO probably will) see lower end PDA's like the Palm M-100 given away for free to get consumers hooked into specific service plans that will generate a growing revenue stream from Palm OS equipped devices.
At the higher end, Palm is rapidly developing the support structure needed (with companies like IBM, SUNW, ORCL, Siebel) for large enterprise customers, which will generate increasing revenue both from the high end Palm's (V and VII and the early-next- year's equivalent of the iPaq). This is around 30% of Palm's revenue right now, but they will have tough competition from CPQ and HWP, both of whom already have a well-established enterprise customer base.
Where does this leave HAND? Selling a consumer product into a fast growing market, but with shrinking retail prices and profit margins. Right now, the GM's on these devices are around 35-40%, but they're bound to come down as more companies like Sony get into the marketplace.
It'll be interesting to see if HAND can develop an enterprise strategy, or if they stick with the consumer market - which will still be pretty large. If this is their plan, they'll grow like bandits for the next year or two as the overall consumer PDA market grows, but they're going to be increasingly squeezed on selling prices and margins.
Interesting times ahead for this market. Palm has "gorilla" potential, but execution and competitive products/services will be key.
JM2cW.
David T. |
