Another attempt by Palm to get back in the "game":
Palm Unveils iPhone Competitor, the Pre
By MATT RICHTEL
January 9, 2009
LAS VEGAS — Seeking to revive its sharply fallen fortunes and produce a successor to its aging Treo device, Palm unveiled a sleek new smartphone, the Pre, on Thursday and an exclusive partnership with Sprint to distribute it.
Palm executives say the touch-screen device and the new operating system inside of it, WebOS, break new ground in the fiercely competitive smartphone market. The phone’s selling points include an emphasis on fast Web browsing and efficient multitasking.
Jon Rubinstein, executive chairman of Palm, resisted comparisons between the Pre and the iPhone from Apple.
“Our intention was never to build an iPhone killer but to build a killer Palm product,” Mr. Rubinstein said in an interview. He said he felt Palm had been fighting an uphill battle with outdated devices and software, and was doing so no longer.
“The Pre allows us to get back in the game,” he said.
Ed Colligan, president and chief executive of Palm, told a press briefing at the Consumer Electronics Show here that the Pre would be available in the first half of the year — “as soon as possible.” The company did not disclose its price.
Mr. Colligan showed off the phone’s sophisticated interface and the way it charges on a special platform without the need to attach a cable. The Pre comes with 8 gigabytes of storage, GPS navigational capabilities, Wi-Fi networking and a slide-out keyboard.
For Palm, the announcement is part of an effort to reboot a company whose Treo was once synonymous with smartphones, before competitors like the iPhone and BlackBerry surpassed it. It not only wants to catch up in the phone market, it wants to set a new bar. But it faces intense competition from companies that are vying for the same customers.
Investors welcomed the Pre’s unveiling, sending Palm’s stock up $1.15, or 35 percent, to $4.45. The stock was in the $14 range two years ago.
Roger Entner, a telecommunications industry analyst at Nielsen, said that while Palm had serious hurdles ahead of it, his early impressions of the phone were positive. He noted that if the Pre catches on, it could improve the outlook for Palm and also Sprint, which like Palm has been struggling mightily to regain its former stature.
“If this device does really well, it gives people a reason to go to Sprint,” Mr. Entner said. “It’s one of those potentially iconic devices. The Razr, the iPhone, devices like that made people switch carriers. That’s what Sprint is hoping for.”
Dan Hesse, Sprint’s chief executive, said at the press conference that Sprint had the most dependable high-speed data network, an apparent swipe at the problems iPhone users have had with AT&T’s network.
Industry analysts have been skeptical of Palm’s ability to revive its reputation and market share. In the United States, phones that use the current Palm operating system make up about 14 percent of smartphones in use, putting Palm fourth behind the BlackBerry maker Research In Motion, Windows-based phones and the iPhone, according to comScore.
The company’s financial fortunes have soured too. In its second fiscal quarter, which ended Nov. 28, its sales of smartphones were $171 million, down 39 percent from a year ago. Excluding one-time charges, its quarterly losses soared to $80.2 million, up from $7.8 million the year earlier.
Palm has not had much luck with its recent efforts to innovate. In 2007 it announced that it would build the Foleo, a kind of smartphone accessory in the form of a laptop, but it canceled the project within a few months.
Analysts say Palm could have trouble getting outside software developers to create programs that will work on its WebOS phones. Developers are now heavily focused on BlackBerry devices and the iPhone because the number of people using them is large and growing. The developers have of late become more critical to the success of mobile phones because they can enrich the phones by adding all kinds of functions — from games to navigation services.
“The essence of what is going to make or break a Palm platform is whether or not you can get developers committed to it,” said Ken Dulaney, a mobile computing analyst with Gartner.
Another challenge is macroeconomics. People are less likely to spend money to upgrade to a fancy new gadget if they are keeping an eye on their bank balance.
Roger McNamee, a Palm board member and a major investor in the company, acknowledged that economic conditions were not ideal, but he added that he thought the size of the mobile phone market left plenty of room for success.
“Given the economy, a perfect outcome would be a critically acclaimed start followed by something like the early days of the iPod, where every buyer loved the product, but unit volumes started small and grew with time,” Mr. McNamee said. “In the 1.2-billion-unit cellphone market, you don’t need much market share to generate billions in revenues.”
Mr. McNamee is a co-founder of Elevation Partners, an investment firm that last year invested $325 million in Palm. This month it agreed to invest $50 million to $100 million more, which could bring its stake in Palm to as much as 40 percent.
Mr. McNamee said he believed that the new Palm platform represented a fundamental improvement over that of the iPhone and BlackBerry. Because it emphasizes on-the-go browsing and multitasking, he said, it is better suited for a mobile device.
“Apple’s Mac OS X is about eight years old, and the BlackBerry platform is more than a decade old,” he said. “Palm’s platform is brand new. A new platform gives us the opportunity to innovate the way Google goes. This product is just the starting point.”
Copyright 2009 The New York Times Company
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