Palm

On the eve of iPad sales start, and the soon-to-be classic quotes from iPad experts, it's time to play back some of the classic iPhone expert predictions from yesteryear:

"[iPhone] just doesn't matter anymore. There are now alternatives to the iPhone, which has been introduced everywhere else in the world. It's no longer a novelty." - Eamon Hoey, Hoey and Associates, April 30, 2008

"We are not at all worried. We think we've got the one mobile platform you'll use for the rest of your life. [Apple] are not going to catch up." - Scott Rockfeld, Microsoft Mobile Communications Group Product Manager, April 01, 2008

"Microsoft, with Windows Mobile/ActiveSync, Nokia with Intellisync, and Motorola with Good Technology have all fared poorly in the enterprise. We have no reason to expect otherwise from Apple." - Peter Misek, Canaccord Adams analyst, March 07, 2008

"[Apple should sell 7.9 million iPhones in 2008]... Apple's goal of selling 10 million iPhones this year is optimistic." - Toni Sacconaghi, Bernstein Research analyst, February 22, 2008

"What does the iPhone offer that other cell phones do not already offer, or will offer soon? The answer is not very much... Apple's stated goal of selling 10 million iPhones by the end of 2008 seems ambitious." - Laura Goldman, LSG Capital, May 21, 2007

Motorola's then-Chairman and then-CEO Ed Zander said his company was ready for competition from Apple's iPhone, due out the following month. "How do you deal with that?" Zander was asked at the Software 2007 conference. Zander quickly retorted, "How do they deal with us?" - Ed Zander, May 10, 2007

"The iPhone is going to be nothing more than a temporary novelty that will eventually wear off." - Gundeep Hora, CoolTechZone Editor-in-Chief, April 02, 2007

"Apple should pull the plug on the iPhone... What Apple risks here is its reputation as a hot company that can do no wrong. If it's smart it will call the iPhone a 'reference design' and pass it to some suckers to build with someone else's marketing budget. Then it can wash its hands of any marketplace failures... Otherwise I'd advise people to cover their eyes. You are not going to like what you'll see." - John C. Dvorak, March 28, 2007

Even if [the iPhone] is opened up to third parties, it is difficult to see how the installed base of iPhones can reach the level where it becomes a truly attractive service platform for operator and developer investment." - Tony Cripps, Ovum Service Manager for Mobile User Experience, March 14, 2007

"I'm more convinced than ever that, after an initial frenzy of publicity and sales to early adopters, iPhone sales will be unspectacular... iPhone may well become Apple's next Newton." - David Haskin, Computerworld, February 26, 2007

"Consumers are not used to paying another couple hundred bucks more just because Apple makes a cool product. Some fans will buy [iPhone], but for the rest of us it's a hard pill to swallow just to have the coolest thing." - Neil Strother, NPD Group analyst, January 22, 2007

"The iPhone's willful disregard of the global handset market will come back to haunt Apple." - Tero Kuittinen, RealMoney.com, January 18, 2007

"[Apple's iPhone] is the most expensive phone in the world and it doesn't appeal to business customers because it doesn't have a keyboard which makes it not a very good email machine... So, I, I kinda look at that and I say, well, I like our strategy. I like it a lot." - Steve Ballmer, Microsoft CEO, January 17, 2007

"The iPhone is nothing more than a luxury bauble that will appeal to a few gadget freaks. In terms of its impact on the industry, the iPhone is less relevant... Apple is unlikely to make much of an impact on this market... Apple will sell a few to its fans, but the iPhone won't make a long-term mark on the industry." - Matthew Lynn, Bloomberg, January 15, 2007

"iPhone which doesn't look, I mean to me, I'm looking at this thing and I think it's kind of trending against, you know, what's really going, what people are really liking on, in these phones nowadays, which are those little keypads. I mean, the Blackjack from Samsung, the Blackberry, obviously, you know kind of pushes this thing, the Palm, all these... And I guess some of these stocks went down on the Apple announcement, thinking that Apple could do no wrong, but I think Apple can do wrong and I think this is it." - John C. Dvorak, January 13, 2007

"I am pretty skeptical. I don't think [iPhone] will meet the fantastic predictions I have been reading. For starters, while Apple basically established the market for portable music players, the phone market is already established, with a number of major brands. Can Apple remake the phone market in its image? Success is far from guaranteed." - Jack Gold, founder and principal analyst at J. Gold Associates, January 11, 2007

"Apple will launch a mobile phone in January, and it will become available during 2007. It will be a lovely bit of kit, a pleasure to behold, and its limited functionality will be easy to access and use. The Apple phone will be exclusive to one of the major networks in each territory and some customers will switch networks just to get it, but not as many as had been hoped. As customers start to realise that the competition offers better functionality at a lower price, by negotiating a better subsidy, sales will stagnate. After a year a new version will be launched, but it will lack the innovation of the first and quickly vanish. The only question remaining isif, when the iPod phone fails, it will take the iPod with it." - Bill Ray, The Register, December 26, 2006

"The economics of something like [an Apple iPhone] aren't that compelling." - Rod Bare, Morningstar analyst, December 08, 2006

"Apple is slated to come out with a new phone... And it will largely fail.... Sales for the phone will skyrocket initially. However, things will calm down, and the Apple phone will take its place on the shelves with the random video cameras, cell phones, wireless routers and other would-be hits... When the iPod emerged in late 2001, it solved some major problems with MP3 players. Unfortunately for Apple, problems like that don't exist in the handset business. Cell phones aren't clunky, inadequate devices. Instead, they are pretty good. Really good." - Michael Kanellos, CNET, December 07, 2006

"We've learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They're not going to just walk in." - Ed Colligan, Palm CEO, November 16, 2006

Nostalgia was better in the old days...

Cusick says his checks find Palm is getting only about 1% share of handset sales at Verizon Wireless, or about 10,000 units a week, versus 400,000 units that were sold in to the company. At this rate, he says, there is “no prospect of Verizon follow-through” in the May quarter - and he sees weak sell-in at AT&T in the quarter as well. (AT&T has said plans to launch a Palm phone, but no timetable has been announced, I would add.) He sees Sprint launching other new smart phones soon, “which would reduce Palm’s share even further.”

link: Palm: Macquarie Downgrades; Cuts Target To $4, From $10 - Tech Trader Daily - Barrons.com

Stepping back into the wayback machine to read analyst commentary from 6 months prior to the launch of WebOS (June 27th, 2008):

In a report form Deutsche Bank’s (Sell rating). They noted that 38% of the shares were sold short, while 10 holders account for almost 70% of the shares outstanding.

In Deutsche Bank’s view, Palm’s future would be “entirely dependent on their new products, services and operating system,” all due next year. “If these turn out to be good, then the stock could do well,” he says. “If the new entries are not attractive, then Palm risks bankruptcy.”

BlackBerry - BlackBerry Loves U2

Last year U2 chose Research in Motion as the main sponsor for its tour.

Read More: Wired.com

Blackberry might love U2 but does Bono still like Palm?

You might know Elevation for its most famous partner, U2's Bono. In the summer of 2007, the firm committed $325 million to Palm in exchange for a 25% stake in the ailing handheld computing pioneer. By the following winter, the partners would up their investment by another $100 million.

Elevation has since sold some of its preferred stock, but according to Palm's SEC filings, it still holds enough common and preferred shares to account for roughly 30% of the business.

Others who bought around the same time as Elevation are struggling with a 33% loss, and that's after accounting for a $9-per-share dividend.

Read more: fool.com

Maybe Bono should pick up his Blackberry in between gigs and work on a deal between RIM and Palm.

Well, I don't want to talk about any specific company. I'm just making a general statement that we think competition is good. It makes us all better. And we are ready to suit up and go against anyone. However, we will not stand for having our IP ripped off, and we'll use whatever weapons that we have at our disposal. I don't know that I could be more clear than that.

Tim Cook, my favorite Apple exec, in January 2009.

One thing should be obvious: the accusations against HTC are aimed at Google and Microsoft or more broadly still, they are aimed at any mobile software competitor that intends to use touch and gesture inputs.

When Jobs said in 2007

We've been pushing the state of the art in every facet of this design. We've got the multi-touch screen, miniaturization, OS X in a mobile device, precision enclosures, three advanced sensors, desktop class applications, and the widescreen video iPod. We filed for over 200 patents for all the inventions in iPhone and we intend to protect them.

he implied that Apple had approached this new input method with much more care than when they introduced the mouse and windowing interfaces in 1984.

Unlike the fight over Windows, which was a copyright debate, this will be all about patents. Apple ultimately lost the GUI fight over the MasOS windowing interface, which is why I think they are much more prepared this time.

Given this strategic intent, the only questions were how the war would be engaged and on what terms. A few skirmishes caused some head fakes.

First, came apparent threats against Palm. Apple was certainly debating going after Palm, but I think they realized it would not be a good strategy. Mostly because the signal would be weak. There would be few consequences to Palm being punished. Palm's integrated model is not employed by many of the larger device vendors. Except for Nokia, all other vendors license their OS, Samsung, LG, Sony Ericsson and Motorola would not be infused with anxiety over Plam taking a hit.

Second, came the pre-emptive attack from Nokia. Apple was not ready to go after Nokia last year because Nokia did not yet have a UI "worthy of being infringing".  In other words, there was no target to shoot at.  Nokia's suit was pre-emptive in that it centered on their desperate wish to have a cross-license agreement--trading GSM patents for touch patents.

That skirmish should not detract from what's the real goal here:  securing monopoly rights to mobile computing interfaces.

Palm: Pacific Crest Downgrades; Merrill Cuts Target To $5; Needham Fears “Oblivion” - Tech Trader Daily - Barrons.com

Palm unveiled the webOS and Pre on Jan. 8th, and the stock skyrocketed from $3.30/share the day before to $7.14/share on Jan. 15th.

January 2009 predictions for Palm by Morgan Keegan:

About Palm at Sprint: Storm/iPhone-type Success At Sprint For the Palm Pre Would Lead to About 630k-1mm/quarter

Our 450k/quarter Estimate For Pre Look Wholly Realistic Based On Success Of Other "Hero" Campaigns

Your correspondent, January 2009:

Now that the land grab is over, expect Bono to get his payoff as Palm gets acquired by a hardware vendor desperate for relevance. As Motorola is on its knees, my bet would be on Samsung, though a bidding war with Sony Ericsson would not be a surprise.

Now I'm not so sure. Faucette of Pacific Crest today:

While we believe that Palm could ultimately be a very attractive acquisition target, we are concerned that if the company is not prudent in maintaining balance-sheet resources, any potential acquirer may be content to just wait until things become even more desperate.

Dave Whalen and I just returned from a very successful meeting with Verizon Wireless, where they acknowledged that their execution of our launch was below expectations and recommitted to working with us to improve sales. To accelerate sales, we initiated Project JumpStart nearly three weeks ago. Since then, nearly two hundred Palm Brand Ambassadors, supplemented by Palm employees from Sunnyvale, have been training Verizon sales reps across the U.S. on our products. Early results from the stores have already shown improvement on product knowledge and sales week over week. You may have also seen a growing number of Palm ads on billboards, bus shelters, buses, and subway stations-all getting the word out about Palm.

How hard can it be to explain multitasking?

link: WSJ Posts Palm CEO's Letter to Employees

full-year revenue would be "well below" its previous target of $1.6 billion to $1.8 billion. Wall Street was expecting $1.6 billion

If we assume $1 billion/yr. revenues, that works out to about 3 million smartphones a year out of a market that Gartner just forecast to be 215 million this year. That gives Palm just 1.4% share of smartphones.

The WebOS is a fine piece of code, but one has to understand that success in this business is not just doing something right. You have to do everything right:

• Nokia has great distribution and logistics, not so good software or platform story
• Palm has great software, not so good distribution or platform
• RIM has great distribution and service, not so great software
• Android has good software but not great integration of solution
• Apple's software and platform are great, but distribution is still weak
• Microsoft has nothing good at all

The question of acquisition invariably comes up. The obvious answer would be to pair Palm with somebody who needs what they have and who has what they don't. Unfortunately no perfect fit arises.

UPDATE 3-Palm cuts revenue view on weak phone sales | Reuters

Palm warns of 30% miss on estimates.

Feb. 25 (Bloomberg) -- Palm Inc. said it expects that adjusted revenue for the third quarter of fiscal year 2010 will be in the range of $300 million to $320 million. The average estimate of analyts surveyed by Bloomberg was for adjusted third-quarter revenue of $409.3 million. The company said revenue for the quarter and full year are being affected by “slower than expected consumer adoption of the company’s products.”

link: Palm Sees Third-Quarter Adjusted Revenue $300 Mln to $320 Mln - Bloomberg.com

The last four months have seen tremendous app growth. Apple grew by 59k apps while Android added nearly 10k and Nokia added 5.5k apps to Ovi.

As a percent, Palm grew the fastest with 1,352%, followed by Ovi with 827%. The slowest growing was actually Blackberry App World with a mere 56% growth.

More curious is the popularity of certain categories. Games and Books are dominant in the App Store, while Personalization and Music account for more than half of Ovi (ringtones and wallpapers?)

Finally, in terms of catalog ranking overall, Ovi climbed the league table to third spot behind Apple and Android and overtaking Blackberry App World. Palm overtook Windows Mobile Marketplace which is now dead last with 693 apps.

link: Distimo Mobile World Congress 2010 Presentation - Mobile Application Stores State of Play

Comscore revealed their latest survey resultsfor the US mobile subscriber market. From the latest data and the data previously released in October we can put together a few insights.

The number of smartphone users increased by 3.2 million, growing at over 1 million new users per month.

Apple and Android added about 1 million users each. RIM added 1.4 million with Symbian adding about 200k users. Palm lost 441k users and Microsoft lost about 44k users.

Non-smartphones lost 2.1 million users and 1 million subscribers were added to the top line.

The non-smartphones lost 1% share in the quarter and 6% since February. Smartphones make up 17% of all users.

Google has overtaken Symbian to rise from last place in the platform installed base and is closing on Palm.

At 5% share erosion per year, the non-smartphone market will completely disappear in about 14 years, though I feel 10 years is a more likely target with 5 years until the market is 50% penetrated.

It's time to re-evaluate the categorization of smartphones. The term has always been problematic. It loosely means a phone that runs an advanced operating system and has third party SDKs. There is no industry standard definition and some call it a converged device or a multimedia device. One analyst famously said that the iPhone did not count as a smartphone on launch because it was not open to developers.

I'd propose a different definition, not based on the attributes of the device, but the jobs that the device is hired to do. This is in a way, the same distinction between Facebook and MySpace. They are clearly hired to do different things by their users and as a result don't directly compete. When you do this job-based segmentation, you realize that iPhones, Android devices and Windows Mobile and Palm are fairly similarly used. Blackberry, however, does not match the profile. (Neither do most recent Symbian devices, though for different reasons.)

The most common jobs I can see in use with the first cohort of devices is (Comscore data exists to back this up)

• browsing
• social networking
• applications/games
• email
• media consumption
• navigation

The Blackberry has relatively poor utilization of any function except for email and perhaps social networking (though the latter is not likely in company-sourced devices). The focus on a large number of jobs to be done is what distinguishes smartphones from the more limited "feature phones". By this logic Blackberry is hired as a "feature phone".

It's also instructive to follow commentary among enthusiasts. It's fairly clear that this segmentation exists implicitly: Android, iPhone, Palm and WinMo are comparable while Blackberries are for a different demographic, different user, different usage.

Finally, there is the gut check. It's become clear to me that what users do with Blackberries is similar to what they do with voice phones: voice and messaging. Although additional functionality is available, it hardly gets used because it's hard to use.

But you may ask: so what? The reason this is significant is that smartphones are embryonic mobile computers with a clear trajectory for improvement. Feature phones are overshot voice phones which are likely to be disrupted by data-centric entrants.

On a different level, it also means that growth stats for the two product types are not comparable. Saying that the Blackberry is outgrowing the iPhone (or vice versa) is meaningless.

It also means that Blackberries, being an evolution of voice products, still have a huge growth potential with those customers which are looking for messaging as an improvement for their good enough voice products and for whom smartphones are over-serving.