In what may be the biggest what-were-they-thinking story of the decade, Palm ships a product with operating system software by its competitor, Microsoft. A Forbes article sums it up: ‘…When Palm announced today that its new smartphone would run an operating system from Microsoft, it was the equivalent of Coca-Cola agreeing to fill its bottles with Pepsi…’ The tragedy of this story is not the usual Microsoft crushing a competitor with its monopoly, but how Palm, a company with a great product, has managed to destroy itself slowly over the years.

My observations as the reasons for Palm’s current and continuing demise:

 

• Palm’s products have been wildly over-priced for years.

 

 

• Palm has been simply re-packaging the same old hardware and charging a premium price for it.
• The company has created tremendous confusion over the years by introducing a multitude of ‘new’ models that are basically the same thing. The same for its desktop software, mutltitudes of ‘upgrades’ that essentially do the same thing.

 

 

• Some of Palm’s products have had no new features for years with no decrease in price.

 

 

• Palmtop computers that cost as much as a laptop are an obvious dead-end. Something that can be dropped in mud, kicked and otherwise easily broken and costs over $300 limited Palm’s market.

 

 

• Company name and logo change of the week: Palm Pilot, Palm Computing, Palm Source, PalmOne, Palm. This must be how they’ve kept themselves busy over the years: simply changing names and logos back and forth instead of improving their product.

 

All of this reeks of colossally bad management or a marketing department run-amuck at Palm. They’ve sold the same warmed-over merchandise at a premium price for years when they should have been cutting prices and adding features. This is not an instance of Microsoft out-competing Palm, this is an instance of Palm destroying itself. Palm could have been like Quicken who has successfully fended off Microsoft for years. Now Microsoft is ready to add another corporate corpse to its belt through sheer incompetence on the part of Palm.

Is this another instance of companies like Harley-Davidson and Rolm which were mergered and acquisitioned to death? Whether Palm was wrecked by its acquisition by 3Com, the subsequent spin-off, or by its own poor management or all the above is an open question. If I were a shareholder I would be revolting.

An appropriate suitor to get Palm out of this mess: Apple. If Apple revived the Palm OS by putting it on its best-selling iPod, things could change overnight. Given Palm’s history of attempting to blow the brains out of its own cash-cow, I doubt this will happen.

In the end the consumer is the one who is suffering by having to buy Palmtops in a market dominated by Windows Mobile and Palm OS, both of which cost too much. This could all become an opportunity for Linux-based handhelds.