Could Palm Survive a Failed Pre Smartphone?

Palm's upcoming Pre wonderphone has been the focus of attention here and elsewhere in the media for two reasons: First, because it appears to be a serious contender; second, because it looks like Palm is betting the bank on the device's success. So what happens to Palm if the Pre isn't a screaming market success?

Palm, of course, has a long and very distinguished heritage in the handheld-device market. It was the manufacturer of the first PDA I owned (and I bet it was yours too). But PDA technology began to mature just as the whole world was going nuts about cellphones, and the smartphone emerged as a half-PDA, half-cellphone. And that was the start of Palm's troubles.

The company was not able to keep up with the rocket-like advances in smartphone hardware or software since then. The venerable Palm OS on Treo phones never surpassed its rivals, Windows Mobile, Blackberry and the iPhone's OS X. In fact Palm just reported a 55% decline in smartphone sales quarter-on-quarter, a number that can't be blamed on the economy alone.

Enter the Pre. It's powerful enough to be the first true rival for the smartphone throne currently occupied by the iPhone. It has a new operating system, webOS. It's got a physical keyboard, a strong specifications list and will have an iTunes-like app store, the App Catalog. Palm has poured millions of dollar into this one device, and lately secured millions in extra cash by releasing more stock.

And it could go wrong. The public may not like the phone's hardware, OS, or its pricing (still undecided). Uptake of applications in its app store may not be as swift or successful as Apple's, and it may simply pale in comparison. The 2009 tie-in to Sprint in the U.S. may cause sales to founder—after all, it's a network provider with a spotty history when it comes to consumer happiness. First-release firmware may have serious glitches (a situation that dogged the Blackberry Storm on release), or last-minute production problems could cause a delay to its planned release date this summer. 

Would Palm crumble under that strain? Probably not. The Pre looks to be a solid offering, and will likely see at least minimal success. And Palm has promised a slew of new phones running webOS—which, if you think about it, is the core value of the Pre since the hardware is not too magically different from other smartphones out there. You can also bet Palm's business planning team has three or four contingency plans at the ready, and while that may include "unhappy" moves like scaling back costs in the company, Palm has a strong brand name and expertise that will remain valuable.

But the smartphone market is moving swiftly. And whether the Pre succeeds or not, Palm will have to remain very agile indeed.

[via the New York Times]

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