palmOne Future Hinges on Treo 650
An article in TheStreet.com "Investors Hung Up on palmOne's Prospects" highlights and discusses many of the issues that Treonauts has been raising over the past three months.
Among others, they note that palmOne is "becoming increasingly dependent on one product line for growth even as competition in the business heightens." The product line in question is increasingly becoming just the Treo line of smart phones and any news perceived to be negative or an added risk to the Treo's dominance has resulted in major stock fluctuations over the past two weeks as "it fell 11% on Aug. 31 and another 11% on Sept. 8" - among others this was believed to be the result of a supposed Nokia 'Treo Killer' on the horizon first and then BlackBerry's new 7100t release.
Although most "investors can't seem to figure out" palmOne, bulls (like Treonauts) are pinning their hopes for the company "largely on the growing popularity of smart phones which as we reported previously is poised to see dramatic growth over the coming years "growing from about 17 million units worldwide this year to about 90 million units in 2008, making it one fo the fastest-growing technology sectors".
But will Treo be able to reap the rewards? Again, "backers of palmOne's stock think the company is in a prime position to benefit from that growing market". Well... yes, but how much? Treonauts projections of palmOnes's unit sales for next year are some 1 million units in a segment that will have grown to over 25 million units - giving the Treo line a paltry 4% market share... not exactly a leadership position... but one that should give palmOne ample food for thought as it sets its future strategy. In this area there are "many investors who appear worried that the smart phone market - or at least palmOne's opportunity within it - may not be as good as the bulls think".
However, TheStreet goes on to state that "even skeptics project that the company's smart phone sales will only increase" but then again this is not really a hard thing to achieve in a segment that is growing at a compound annual growth rate of 44%. For palmOne to really achieve big things it will have to grow many fold more than this. It's obvious that the forthcoming Treo 650 will play a crucial role in this projected growth but it will be entering the market against other technology heavyweights which have been innovating their own offerings at a clip that is arguably a lot faster than palmOne's (WiFi, Bluetooth, screens, processors and hard drives ring a vague bell...).
In this respect, "competition is clearly growing in the smart phone segment. While few companies have come out with direct competitors to the Treo, many have introduced devices that offer similar - or even better - features, often for hundreds of dollars less". RIM's new BlackBerry is a prime example as it retails for about $200 - although it lacks the versatility of the Treo beyond basic email, calendar, PIM and web connectivity.
However, the issue facing palmOne is not only about price and the "risks of seeing its margins cut" but about rival manufacturers continuing to introduce faster processors, multimedia functions and wireless features at a more rapid pace than palmOne as the company "typically updates its handheld lineup only twice a year, a plan that may not work in the smart phone segment. Many features of the Treo 600 - on the cutting edge when introduced - are now being surpassed by newer ones such as higher resolution cameras and video. And the big cell-phone manufacturers often refresh their family of products with several new phones each year." Naturally, if palmOne decided to go this route we might all have our Treo Zen earlier than expected 
