Analyst: Palm’s Special Sauce Is Finger Lickin’ Good
by John Paczkowski
Posted on August 19, 2009 at 4:45 AM PT
Now that Palm has finally realized there’s no longevity in forever shipping incremental improvements to the Palm Pilot, the company got quite a future ahead of it.
Never mind that it faces some particularly long, historic odds. That it has launched a new bet-the-company product in the worst economy we’ve seen in 50 years, for example. That with the Pre, it is challenging Apple’s (AAPL) iPhone, one of the most successful mobile phones in history. That it’s competing in a market crowded by the likes of Research in Motion (RIMM) and Nokia (NOK), which shipped an astonishing 468 million phones in calendar 2008.
Never mind all that. Because, according to RBC Capital Markets analyst Mike Abramsky, Palm (PALM) has the “special sauce”–the means of orchestrating a second act, perhaps even one of Jobsian proportions.
“Following a period of decline and facing oblivion, we believe Palm has the potential for a remarkable smartphone turnaround,” Abramsky writes in a lengthy research note on the wireless industry that I mentioned here yesterday as well. “With its new strategy, WebOS product line and under the direction of a new management team headed by ex-Apple executive Jon Rubinstein, Palm (like RIM and Apple) is, in our opinion, well-positioned for smartphone leadership.”
Abramsky sees a promising future: “Our outlook calls for Palm to quickly recover, growing from an estimated 1.3 percent data-centric smartphone shipment market share (0.2 percent TAM) or 2.2 million units in calendar 2009 to 3.6 percent share (1.3 percent of TAM) or 18.2 million units in calendar 2012. Targeting the PIM-centric segment of the Palm legacy, Palm in our view faces near-term risks, but has the ’special sauce.’” (Click on table below to enlarge.)
And what, exactly, is that? The stuff that goes between the two all-beef patties and the lettuce and cheese?
Not quite. Abramsky’s idea of special sauce includes vertical integration, “controlling the end-to-end smartphone software and hardware platform, a ground-up developed smartphone OS platform with unique innovations like multitasking, Synergy (user data integration), developer-friendly SDK, and compelling and clever hardware/software designs [that] all combine to offer a unique, iconic smartphone experience, differentiated from incumbent vendors.”
A hell of an ingredient list. But it’s one that the Pre and Palm’s webOS largely deliver on–despite some drawbacks. And if Palm can improve on that list, the company should have little trouble wooing back disenfranchised users and winning new ones.
Abramsky, again: “The huge positive reception to the launch of Palm’s Pre, its first WebOS device–despite the already broad awareness of iPhone–illustrates pent-up demand for innovative, non-intimidating smartphone user experiences. The accolades for Pre also show Palm has the potential to provide that rare iconic smartphone experience, above competitors, some incumbents and in the company of RIM and Apple.”
Which is pretty much what Palm has set out to do, as CEO Jon Rubinstein noted in the company’s last earnings call. “There is room for three to five players in this space,” he said. “We don’t have to beat one another to prosper.”
You do have to execute, though. And execution hasn’t historically been one of Palm’s strong suits. Perhaps it will improve with the addition of that special sauce Abramsky’s talking about.
PREVIOUSLY:
- Palm: The Turnaround Story of the Year
- Pre Makes Palm a New Man in Only Minutes a Day
- Palm: Execution Is Everything
Comments
Bravo! J
Posted by Lee Meyer at August 19th, 2009 at 5:51 amA more than fair editorial showing you have the “buns” to go with the special sauce.
I believe that Palm needs to improve the quality of the Pre. I understand it is cheap and poorly fitted.
Posted by David Owens at August 19th, 2009 at 7:39 amAnd pretending to be an iPod?? What’s up with that?
The Pre beat the iPhone in hype, that’s for sure. Pre is short for Pretender.
I find the things this analyst is saying to be the same trite cheerleading we have heard all along for the Pre. But it is removed from the facts on the ground, so it is not going to be a good indicator of what’s happening next with Pre. You can’t accurately predict the future for Pre is you can’t accurately describe the present.
> Now that Palm has finally realized
> there’s no longevity in forever
> shipping incremental improvements
> to the Palm Pilot, the company got
> quite a future ahead of it.
Now they can ship incremental updates to the Pre. They haven’t proven anything yet.
> a ground-up developed smartphone OS
> platform with unique innovations like
> multitasking
That’s almost a troll, because it is easy to find out that the iPhone multitasks in exactly the same way as the Pre and all other computers. It’s the iPhone that has innovated by creating a way for all 3rd party apps to appear to always be running, and to always be available to the user, no matter what they are doing. The user can go tap-tap-tap through any sequence of apps, even 50 long, and the phone remains responsive. With Pre, you can only use 6 apps or so before you have to stop using additional apps. When you watch the users, you see the iPhone users are the ones who are multitasking more effectively. And there is never a situation on iPhone when you can’t launch the Phone app because you’re out of resources. There is never a time when your background music skips on iPod. This is a HUGE part of the 90% user satisfaction rating for iPhone and 50% rating for Pre. To many users, the Pre stalls on them unexpectedly as use it. They don’t know what launching and quitting an app is, they are not Computer Science people.
Also, the Pre can’t make a call and access the Internet simultaneously, like the iPhone can. That is the most important kind of multitasking a phone can do. The Pre can’t do the famous iPhone “Calamari” commercial that explained to so many people for the first time why you want Web in your phone. When I’m on hold on iPhone I do email or surf the Web.
> differentiated from incumbent vendors
I don’t know how differentiated the Pre is from the iPhone.
The keyboard is offered up as a reason to get a Pre but the iPhone enables users to type faster and more accurately than Pre. Pretending that soft keyboards failed is not a strategy for Pre success. We did not have a Newton-type PR disaster with iPhone keyboard.
The traditional battery pack in Pre is offered as another reason to get one, but the iPhone has twice the battery life built-in, and iPhone has dozens if not hundreds of external battery packs. Some you just plug onto the iPhone briefly to charge the internal battery. Some are built into an iPhone case so you attach them all day. Either way, the iPhone and 2 batteries is smaller and easier to use and lasts longer than Pre with 2 batteries.
> The huge positive reception to the
> launch of Palm’s Pre
250,000 sold in the first 3 months is a huge positive reception? I really don’t think it is, when you consider the dollar value of all the free publicity Palm got, even many months before it shipped Pre. After months of hype and being mentioned casually in the same breath as Apple and RIM they should have sold more phones.
> illustrates pent-up demand for
> innovative, non-intimidating smartphone
> user experiences.
“Pent-up demand” means “nobody is buying.”
“Pent-up demand” is what Microsoft kept saying would sell Vista, and is what they are saying is going to sell Windows 7. But people are still buying XP. I find it hard to believe there is much pent-up demand out there for innovative, non-intimidating smartphones when iPhone 3G is $99. People already know the iPhone is innovative and non-intimidating (works like an iPod) and it’s only $99. How pent-up can your demand get? Plus, iPhone is available to many more users because it’s worldwide … iPhone is erasing any pent-up demand way before Pre can get to those users. People aren’t going to pass on $99 iPhone and wait for a $299 Pre with the same storage to arrive in a GSM version, if one ever does.
Also, the Pre has been on sale now for 3 months. Talk about the actual sales figures, you don’t need to talk about “pent-up demand”. Why wouldn’t you include the sales numbers if they’re good? Because they’re not.
> The accolades for Pre
Again with the accolades, not the sales numbers.
> also show Palm has the potential
Potential is another future thing. Future tense. Maybe maybe maybe. Talk about the sales numbers. Talk about how many had to be returned and replaced. Talk about how only half of the buyers of the Pre are satisfied with it. Talk about how the Pre phones home to Palm with your location and what you’ve been doing with the phone, which is either #1 or #2 on the list of things you don’t do to your users. Talk about how the Linux kernel and WebKit browser that make up 80% of the Pre’s OS are open source and available to all makers of smartphones, and already exist on most phones. Talk about how long it will take Palm to get to 5-10 million installed base that is required for real 3rd party development. Talk about how there is no native SDK on the horizon, only widget SDK. Talk about how there is no media sync software. Talk about how hard the Pre is to use, with a tiny keyboard that has no predictive text like on other phones. Talk about how the Pre is $299 for 8GB, whereas the iPhone is $99 for 8GB or $299 for 32GB.
All of the above things would lead to an actual conversation of what’s right and wrong with the Pre. Then you could set expectations of what’s coming in the future. If you go on and on with buzz words it sounds like Pre will take over the world. If you inquire about actual facts, you see there are HUGE challenges ahead for Palm. Just one of them is that the next Pre OS device was supposed to be a smaller phone for $99. Is that still coming now that you can get a whole iPhone for $99, or are we going to see a $99 Pre instead? How is that going to affect their strategy, having their high-end phone turn into their low-end phone within a few months of launch? How are they going to multitask their way through that?
The funny thing is, Palm is going to go under and people are going to be surprised because they were reading reports from analysts like these that the Pre is a smashing success.
I’m in San Francisco and I have yet to see a Pre in the wild. It is really weird to be on a train (with Wi-Fi) in downtown SF and every other person is using some kind of device, and no Pres to be found, and then read about what a great success they are. Riiiiiight.
Posted by Fred Hamranhansenhansen at August 19th, 2009 at 12:21 pm