Palm’s Slow Descent And The Google Equation

Whether its days are truly numbered or its true come-back is yet to come, the news that an analyst put Palm’s price target at $0 has stirred up debate over the future of the company. As many have said in the past year or so, Palm really bet the company on the Pre and WebOS, and it’s a bet they seem headed towards losing.

What went wrong? Is it really too late? Does Palm still have a chance?

Who knows, really. Undoubtedly, the executives at Palm are sweating it and trying to figure out how to prevent their company from going under—and just for the record, I truly hope they do. They have some great ideas in the Pre, even if some are perhaps ahead of their time (meaning, the technology isn’t good enough yet to support them). Furthermore, having more competitors in this space would breed healthy competition and encourage additional innovation, and losing one who has innovated and inspired would be a loss.

Some of Palm’s mistakes as I see them:

  1. First, the cat-and-mouse game they played with Apple and the Pre’s syncing functionality with iTunes. As strong a case as you might imagine making against Apple “abusing” (read: justifiably using) its power to keep a non-approved device from syncing with its software, it was a losing battle for Palm from day one because they had to rely on breaking USB-IF accordance rules; what they did was effectively faking Apple’s hardware vendor ID in the USB connection to make the Pre appear as an Apple device. For Pre customers, this back and forth could hardly have been a worse experience to deal with.
  2. Second, the positioning of the Pre itself: a direct competitor to the iPhone, instead of an alternative. Going head-on with Apple is an impressively courageous tactic, especially for a much-smaller company like Palm. But Palm was going after the exact same customers with the Pre that Apple is going after with the iPhone: people who want a beautiful, sleek device more than they want a decent phone with quality service. Google, on the other hand, positioned the Android platform specifically as an alternative to the iPhone, e.g. the phone you’d want specifically when the iPhone isn’t what you like (for whatever reason: closed platform, AT&T / exclusive carrier, etc.)
  3. Not branching out beyond the U.S. soon enough, nor widely enough. Demand for the Pre was pretty good around the world after it was first unveiled, but it took them many, many, far too many months before the Pre actually became available outside the U.S., and even today it’s not available in all that many countries. When buzz fades out over your product in countries it’s not available yet, the number of enthusiasts dwindle. On the Internet, such a phenomenon just looks like a general decline of interest altogether.
  4. Not adding the 3D Games layer to the SDK soon enough. Games are a big deal, and WebOS by itself was just not capable enough to do really engaging games. Web technologies are simply nowhere near good enough for that yet.

Since two of the four points involve the words “soon enough”, the question that pops up in my mind is whether Palm simply didn’t have enough manpower dedicated to the Pre (or manpower in general) to pull off their ambitious plan. But my main curiosity lies with point #2: the positioning of the Pre and Google’s presence with Android.

Let’s sidestep for a moment and ignore Palm as a company, and just look at Google. Google entered the smartphone market, competing mostly with the iPhone in that space, but principally with Microsoft in their approach: supply the OS and let handset makers run it on their phones. That approach didn’t work so well: you end up with lowest common denominator products and apps, and customers just don’t get excited by those. Thus, they made the Nexus One. Now Google is in a heated battle with Apple and the gentleman’s agreement not to hire each other’s employees has long come to a halt.

This is where Palm comes back into the picture. Remember all those former Apple employees that Palm hired away? Guess who would just love to hire those engineers now, if Palm goes under. That’s right: Google.

Google stands to gain most with Palm going under, or simply Palm’s shares going down; if they can buy the company for cheap, their position against Apple is strengthened significantly in one fell swoop (and even if Google isn’t interested in the engineers, they know it would sting Apple plenty to buy them anyway).

The challenge for Apple has rarely been greater; they can hardly be the ones buying Palm when it is a den of people who turned their backs to Apple (mostly for money); on the other hand, having all those engineers end up at Google and being put on the Android or Nexus One project could prove even costlier.

All that said, Palm is still alive and kicking today, yet at this stage they have to perform an amazing comeback on top of their comeback. I’m also wondering if Google, with all its subtle power to influence people, might secretly have played a part in preventing Palm from re-entering the race. After all, the Pre is a great product by itself; you’d have expected more success for it. I’d rather not think of such evil plotting by Google, but I’ve been disappointed (and feel betrayed, e.g. Buzz) by them before often enough to not outrightly dismiss the notion.

As far as these three companies are concerned, I suspect we’ll see a lot more below-the-belt punches happening in the near future, and that saddens me.

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