The End of Palm? Let the Bidding War Begin

by Matt Klassen on February 26, 2010

It seems like the writing is on the wall for Palm and its innovative line of mobile handsets. In a report released this week by Reuters, Palm has significantly cut its revenue targets resulting from a surprisingly weak demand for its phones. With the meteoric rise in popularity of smartphones, many analysts wondered if Palm would be able to compete with its larger rivals in the field, and it looks like the answer is finally here.

With the recent distribution deal with Verizon in place, Palm looked set to make a surge in the mobile market and analysts projected a strong Q3 with estimated sales in the area of $424.7 million. However, the report indicates that Palm’s Q3 sales will be in the range of a dismal $285 million to $310 million, a decrease of a staggering 13 percent.

The reason for the slump in sales, according to Palm chairman and CEO Jon Rubinstein , is the slower than expected consumer adoption of its revolutionary products, resulting in reduced order volumes from carriers. Rubinstein writes,

Palm webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today, and our work to evolve the platform and bring industry-leading technology to market continues.

However, driving broad consumer adoption of Palm products is taking longer than we anticipated. Our carrier partners remain committed, and we are working closely with them to increase awareness and drive sales of our differentiated Palm products.

In layman’s terms, even with its groundbreaking platform, the drop in sales means that Palm’s devices are either too confusing or too irrelevant to meet the needs of today’s mobile user. Even with Palm working closely with its carriers to stimulate awareness and interest in the phone, I doubt it will be enough.

For many struggling mobile brands, as Microsoft recently realized, in order to become a major player sometimes a complete overall is necessary. Out with the old, in with the new.The problem for Palm, however, is that the old is already long gone; they’ve done the overall, they’ve produced the revolutionary Pre, and still they’re struggling.

With all their eggs firmly committed to the Pre basket, and with the company’s shares plummeting 18 percent to a measly $6.63, the question is not if Palm will be able to emerge from these financial difficulties, but who’s going to snatch up Palm while they’re at their weakest and most vulnerable? Let the bidding war begin.

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{ 2 comments… read them below or add one }

Jordan Richardson February 26, 2010 at 12:01 pm

I think it’s a little too early to start suggesting that Palm is going to be essentially killed off, but I do think they’ve made a major error in essentially inferring, publicly, that the reason for slow sales is that customers aren’t advanced enough for their product line. Stupid, stupid.

Matt Klassen February 26, 2010 at 12:32 pm

Ya, inferring that your customers are slow probably won’t do anything for sales.

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