Can Palm survive as a standalone company?

Can Palm survive as a standalone company?

Palm needs to take drastic action. Its latest results show the beleaguered handset manufacturer is continuing to flounder.

This week Palm warned that revenue in the current quarter ending in late May would fall to less than £98.83m. Although up from £74.59m a year earlier, it falls far below the £201.49m projected by analysts.

These latest results, which saw Palm's market value fall by half from the start of the year, show that, once again Palm has failed to deliver. The question is, how long can it continue to do so?

Palm’s sell-through numbers say it all. The company shipped a total of 960,000 smartphones during the third quarter, but actual sell-through totalled just 408,000 units - nearly 200,000 handsets fewer than analysts expected.

That Palm could get it so wrong suggests it still hasn't grasped the need to push its products more aggressively in a market awash with competing smartphones.

Opportunites have been lost. Despite being ahead of the curve with its WebOS platform, Palm has failed to translate this into carrier support and consumer demand.

Some of this failure is down to financial constraints. As a relatively small fry in the market it has limited funds, with no more than £85.66m in net cash to meet the increasing cost of promoting its products. With only 1,000 employees, covering the US, Europe and beyond, it is also more than a little stretched.

Its decision to limit its devices to exclusive deals – with Verizon and Sprint in the US and O2 in the UK – was also a major marketing and distribution miscalculation. Wider distribution could have made up for its limited advertising budget and may have stimulated more aggressive selling at the point of sale.

In the meantime, the competition continues to heat up. This is no time to stand still, with Google pushing its Android platform, RIM punting aggressively for market share in the consumer sector, iPhone continuing to trailblaze and Microsoft raising its game with Windows 7.

All in all the prospects for Palm look grim, raising speculation once again that it may go private or become an acquisition target. Likely contenders for making a move on Palm include Microsoft, Nokia and Dell Inc.

Interestingly, Palm did not dismiss the rumours this week with Jon Rubinstein saying the board would look at any 'reasonable offer'.

Certainly the manufacturer looks more appetising to potential suitors now, with its share price on Nasdaq falling 14% to just £2.64 on Thursday.

However there are signs Palm is fighting back. The manufacturer has launched an aggressive sales campaign in all markets, with extensive sales staff training at all points of sale.

It is also concentrating more resources on growing its share of the enterprise sector, looking at the SME and SOHO customers in particular.

In addition Palm is promising a new range of handsets, which is expected to be showcased next week at the CTIA Wireless 2010 show in Las Vegas.

However, with the poor sales of its previous offerings, Palm’s new portfolio will have to deliver something really big to have any hope of turning its fortunes around at this point.

Written by Mobile Today
Mobile Today


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