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  1.    #1  
    why-palm-phones-are-flopping: Personal Finance News from Yahoo! Finance


    Palm Inc. (PALM) bet its survival on a pair of new smart phones. Now, that wager is unraveling, and the company is partly blaming one of its wireless partners.

    More from WSJ.com:

    Crunching the Numbers: Palm's Problems

    Palm's New Pre Takes on iPhone

    IPhone Is High Bar for RIM and Palm

    The struggling handset maker said Thursday its flagship Pre and Pixi devices, which were launched last year, aren't selling as well as it hoped and warned revenue for the year ending in May will be "well below" its forecasts.

    Palm's shares plunged 19% to $6.53 on the disclosure, which renewed questions as to whether the company can compete in a market it helped pioneer.

    In an email to employees obtained by The Wall Street Journal, Palm Chief Executive Jon Rubinstein suggested part of the fault lay largely with Verizon Wireless, which began selling the new phones in January.

    Mr. Rubinstein wrote that "[Verizon (VZ) Wireless] acknowledged that their execution of our launch was below expectations and recommitted to working with us to improve sales."

    Palm declined to make Mr. Rubinstein available, but spokeswoman Lynn Fox said his email shows a recognition that Palm also takes responsibility for its performance, saying that "the entire executive team has been working extremely hard to improve product performance."

    Sales of Palm's new phones, unveiled last year with much fanfare, have stalled amid tough competition, heavy marketing by carriers for rival devices and a dearth of "apps," the programs and games that have driven much of the appetite for smart phones.

    Wireless carriers are ordering fewer phones than expected and putting future orders on hold as "consumer adoption of Palm products is taking longer than we anticipated," the company said its press release Thursday.

    Palm's warning highlights the tough position it's in as a small company in an increasingly crowded market that has attracted bigger and better-funded rivals such as Apple Inc. (AAPL) and Google Inc. (GOOG), which have larger communities of developers creating programs for their devices.

    Palm's newest phones until recently were only available through Sprint Nextel Corp., a carrier that has been battling subscriber defections. The addition of Verizon Wireless, which has nearly twice as many customers, was expected to give Palm a boost.

    In his memo, Mr. Rubinstein said Palm has implemented "a number of initiatives to increase awareness and drive sales." Those include more advertisements and the deployment of nearly 200 staffers to train Verizon sales representatives.

    People familiar with the situation said Palm is preparing to launch the Pre and Pixi through AT&T Inc., the No. 2 U.S. wireless carrier, in the next few months. One of those people said the company was also developing a brand new phone for later this year.

    "I wouldn't say [Palm is] done, but they're pretty close," said Ed Snyder, an analyst at Charter Equity Research, speaking of Palm's ability to be a major player in the smart phone industry.

    Palm is particularly at a disadvantage in negotiating with carriers, which typically pay greater attention and spend more marketing dollars on phones they carry exclusively. For example, Verizon recently spent $100 million on the marketing campaign behind Motorola Inc.'s (MOT) Droid, which helped catapult the Google-based phone to one of its best-selling phones in the fourth quarter.

    Even Sprint (S), which advertised the Pre widely when it had it exclusively, has cut back on the promotion it gives to Palm devices, analysts say. That means Palm has to burn its own cash on marketing and in-store training for salespeople, analysts say. Sprint declined to comment on how well the Palm devices are selling or its marketing.

    Private-equity firm Elevation Partners invested in Palm several years ago and brought in new leadership-including former Apple executive Mr. Rubinstein-to turn the company around. Since then, Palm has developed a new operating system and launched the Pre and Pixi.

    Concerns are rising as to whether Palm can remain a standalone company. Palm said Thursday it has about $500 million in cash, but Kaufman Bros. analyst Shaw Wu estimated the company spent about $90 million since its last quarter ended in November.

    In addition, Palm's smartphone market share has been dwarfed by competitors. While its U.S. smart-phone market share rose slightly to 5.2% in the fourth quarter from 4% a year earlier, according to research firm IDC, that's still less than half of its position two years ago. Meanwhile, Apple's iPhone holds 18.2% of the U.S. smart-phone market, and Research In Motion Ltd.'s BlackBerry holds 43%, according to IDC.

    The device also had the backing of Google Inc. because it runs on its Android operating system.Palm's troubles selling its new phones became evident in December. At the time, the company said in its quarterly report that while it shipped more phones to carriers than expected, the number of those phones that carriers were able to sell to consumers fell sharply from the prior quarter.

    Sachin Agarwal of Somerville, Mass., recently returned his Palm phone. While he eagerly scooped up a Palm Pre Plus in January from Verizon, he returned less than a month later, fed up with what he said was its sluggish responsiveness and lack of apps. "The Pre just wasn't good enough," the 29-year-old said.

    For its fiscal third quarter, which it will report March 18, Palm now expects revenue of $285 million to $310 million, compared with the $425 million analysts predicted, as polled by Thomson Reuters. Palm also said its revenue for the full fiscal 2010 year will be "well below" the $1.6 billion to $1.8 billion it had forecast.

    --Roger Cheng contributed to this article.
  2. Ghost13's Avatar
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    #3  
    Why do people even take these articles seriously? It's obvious these writers do not know anything about Palm aside from the stock dropping. I mean if you really pay attention to the article you will notice these writers state:

    "The device also had the backing of Google Inc. because it runs on its Android operating system."

    Andriod operating system, Seriously?! These guys do not even know it's a Web OS phone!
  3. UserOne
    UserOne's Avatar
    #4  
    Quote Originally Posted by Ghost 13 View Post
    Why do people even take these articles seriously? It's obvious these writers do not know anything about Palm aside from the stock dropping. I mean if you really pay attention to the article you will notice these writers state:

    "The device also had the backing of Google Inc. because it runs on its Android operating system."

    Andriod operating system, Seriously?! These guys do not even know it's a Web OS phone!
    I believe that was a reference to the Motorola Droid mentioned earlier in the article, however I still must agree... the article definitely has the "doom & gloom" slant to it.

    Personally, I think these articles are a bit to be expected when your stock is downgraded by quite a few analyst's, you release a revised earnings estimate that is much lower than expected, and then you have rumors and issues float around about your company (like the production halts in China, for example).

    Just my .02... L8R,
  4. #5  
    It's funny how a glass can be seen as half empty or half full. If my phone sucked it would be one thing, but I personally love my phone.

    I think from the get-go the Pre has been terribly marketed with that freaky zen girl. Now Palm is finally taking steps that should have from the start.

    The phone is also a much different phone than when it was first released. WebOS has been greatly improved through a few updates. There are now over 2,000 apps for the device and that number is steadily growing daily. Flash will be on the phone soon, and that will be huge.

    Palm really should be giving out updated phones to magazines to re-review.
  5. #6  
    The blind leading the blind. Pre/palm zealots refuse to acknowledge the precarious, dire nature of palm's health.
    No matter what evidence is presented to them, their response is invariably the same..."yeah, but.." or " why do people listen to these analysts..."

    Its like they don't want to let facts get in the way of the story THEY so badly want to believe in.

    Palm has put out the best hail mary effort they are capable of with the webos and the pre but given its numerous flaws ie exchange rates, weaknesses, etc, the carriers simply don't feel that heavy marketing campaigns should be thrown their way.

    We all wanted palm to succeed but they just seem to drop the ball constantly... surprisingly even now with rubenstein. I thought the hawkins/ colligan doofus team was the reason for past failures... it seems no matter who is at the helm, palm ends up as the bad news bears with no luck, no marketing, no hype and a lack of dependable hardware anymore.

    What a shame. 10 years ago I was convinced they would rock the world with mobile computing innovations.... They have evolved into nothing more than the keystone cops or the inspector clusoe of the smartphone world - a niche THEY created.

    Amazing,...in a very sad way.
  6. #7  
    Quote Originally Posted by treobk214 View Post
    The blind leading the blind. Pre/palm zealots refuse to acknowledge the precarious, dire nature of palm's health.
    No matter what evidence is presented to them, their response is invariably the same..."yeah, but.." or " why do people listen to these analysts..."

    Its like they don't want to let facts get in the way of the story THEY so badly want to believe in.
    I understand brand loyalty, but this is my 12th mobile device and it's going to end up in the same spot the previous 11 did in about a year (maybe sooner): a box, the trash, a desk drawer or a friend.

    Why are people so crazy about a phone? I like webOS, but not enough to forgive its shortcomings.

    Quote Originally Posted by treobk214 View Post
    What a shame. 10 years ago I was convinced they would rock the world with mobile computing innovations.... They have evolved into nothing more than the keystone cops or the inspector clusoe of the smartphone world - a niche THEY created.

    Amazing,...in a very sad way.
    Marketing has been a big problem. From the scary lady to those awful mom ads, Palm and the carriers blew it. But even if the platform was marketed properly, then you'd have to get past the hardware/quality issues. I've never had to return a phone TWICE!

    I mean, REALLY!!! If the replacement fails, do you EVER go back for a THIRD? This product is probably the ONLY one I've ever replaced twice. If it were a toaster or a laptop or a blender... I would have moved on after the first replacement failed.

    Quote Originally Posted by Ghost 13 View Post
    Why do people even take these articles seriously?
    The last time I checked, the Wall Street Journal isn't a rag paper. It's the best out there, and in this case, backs up the story with facts.

    Many people on P|C are very emotional about their webOS devices, which is great.

    Unfortunately, there's not enough of us on the planet.

    When a company lowers its sales forecast, when internal e-mails are uncovered admitting mistakes, when poor hardware quality leads to bad word-of-mouth, when it takes nine months to include video recording, when missing features remain missing nine months after release, when a Facebook app is unusable, when the average user only downloads a handful of paid apps (How many people have actually spent more than $20 on apps, $10 of which was on Need for Speed?), when the OS is painfully slow...

    This is what happens: Financial newspapers cover the story.
  7. gbp
    gbp is offline
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    #8  
    Now that they have video feature on WebOS they should stop working on new features and focus on releasing 2 more new handsets on several carriers. A slab form , probably an exact iPhone like form factor will create desire in the mainstream customers. 90% of mainstream customers buy phones based on the looks first, then detail details.
  8. #9  
    I replaced the HTC Touch Pro
    7 times due to the failing
    keyboard. I am still on my first
    Pre. Although it probably needs
    to be replaced. The oreo is pretty
    bad now.
  9. #10  
    I'm going to say that it was a fatal mistake to implement the UI in HTML. They can have 10 engineers working on performance, but it will ALWAYS lag iPhone when running on same CPU. The dialer UI is particularly slow. How many times have I pressed the left/right arrows to go between emails only to have the same email reload.

    Writing the UI is generally easy in any language, but when it comes to passing data around, that's when things get hairy. The SDK should be optimized for that. Perhaps their select apps like SMS, Dialer, Email should be re-written in their DDK.
  10. #11  
    I give the analysts a lot of credit. All of this seems to be true, but what do u expect from a first gen phone? I've tried several OS's and came here from a tour that I returned in a week. I was always intrigued by Palm's phones and thought BB was better, but traded the tour for the pre. I love the phone and look forward to seeing what the great "Palm" has in store for later this year. I believe the wait will be worth it. I'm down with Palm for the longhaul. I'm an apple fan, just not satisfied with the iphone. Rubenstein was with apple so I know he has a lot in store for us. Rather, they have a lot in store for us...
    "The Pre is nice..."
  11. #12  
    Gotta chime in with treobk214 and ejohnnyk on this one.

    I'll be getting my Pre when my current contract expires in a few months - regardless of stock pricing, market share or negative public sentiment. I simply love the device.

    But make no mistake, if past (recent) performance is any indicator of future success, Palm is going down. UNLESS...someone the likes of Google buys them up, funds a proper multi-pronged assult of marketing campaigns and launches more robust iterations of WebOS devices.
    Last edited by Renderhaus; 03/01/2010 at 12:46 PM.
  12. #13  
    Launching on Sprint is pretty much a prescription for disaster. By the time the exclusive was up and they launched on VZ, Droid was there as the premier phone. If they had been on VZ instead of Sprint on day 1, things would be very different. 6 months is a long time in terms of handsets.
  13. edlex's Avatar
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    #14  
    Hardware has always been a tricky business. Look at apple's ups and downs and ups while microsoft has been pretty steady sticking to software. In the early 90's apple was all but done untill Job's came back and created the ipod. Truth is palm has always done well as a software company. Market the software and let other manufacturers make and take the risks on the the hardware. webOS is brilliant and I hope it lives on past the pre. Who knows, maybe that was their plan all along.
    FYI: My Pre is as plain vanilla as the day it came out of the box...
  14. #15  
    Quote Originally Posted by edlex View Post
    Hardware has always been a tricky business. Look at apple's ups and downs and ups while microsoft has been pretty steady sticking to software. In the early 90's apple was all but done untill Job's came back and created the ipod. Truth is palm has always done well as a software company. Market the software and let other manufacturers make and take the risks on the the hardware. webOS is brilliant and I hope it lives on past the pre. Who knows, maybe that was their plan all along.
    That used to be a reasonable business model, but with the rise of an ever more capable android where the software is given away, I don't think that works anymore. Also MSFT has the heft to spend a lot of marketing dollars with folks who license their platform. Palm does not.

    Like it or not, they need to be in the hardware business to survive. Personally, I think Nokia should buy them and adopt WebOS as the new platform replacing symbian. But Nokia has even more of an NIH attitude than MSFT does, and that's saying a lot.
  15. #16  
    Quote Originally Posted by treobk214 View Post
    The blind leading the blind. Pre/palm zealots refuse to acknowledge the precarious, dire nature of palm's health.
    No matter what evidence is presented to them, their response is invariably the same..."yeah, but.." or " why do people listen to these analysts..."

    Its like they don't want to let facts get in the way of the story THEY so badly want to believe in.

    Palm has put out the best hail mary effort they are capable of with the webos and the pre but given its numerous flaws ie exchange rates, weaknesses, etc, the carriers simply don't feel that heavy marketing campaigns should be thrown their way.

    We all wanted palm to succeed but they just seem to drop the ball constantly... surprisingly even now with rubenstein. I thought the hawkins/ colligan doofus team was the reason for past failures... it seems no matter who is at the helm, palm ends up as the bad news bears with no luck, no marketing, no hype and a lack of dependable hardware anymore.

    What a shame. 10 years ago I was convinced they would rock the world with mobile computing innovations.... They have evolved into nothing more than the keystone cops or the inspector clusoe of the smartphone world - a niche THEY created.

    Amazing,...in a very sad way.

    HEADS UP ON THIS POST (RIGHT ON)!!!! If Palm came up with hardware that would woo and wow, I might come back. It would have to be 4G and also CDMA-GSM world phone hybrid. I currently have the HTC Hero and will go with Sprints first 4G Android phone. Starting with the 800W the hardware is on a down hill track.!!
    Last edited by Gas Man; 03/01/2010 at 05:44 PM. Reason: English
  16.    #17  
    Advertising did them in.
  17. #18  
    I just left a corporately owned Sprint store here in Tucson. Salespeople were telling prospective customers not to buy the Pre but to get the new Blackberry Curve. Why? Because it was buy one get one free. So the salesperson can get double commission on the sale. The guy finally looked over and saw i had a Pre and walked away. It's not Palm folks. It's the company that is selling the product directly to the consumer. Sprint could care less if a new customer bought a Pre. As long as they buy premium service they don't care what handset you buy. So Palm has to make customers want to buy the product before the consumer hits the store. The Pre on display had a broken USB door and both the Pre and the Pixie were not updated to 1.4. Go figure. You get video recording and you don't update you display product to reflect that?
    Last edited by BrewCity; 03/01/2010 at 10:15 PM.
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