Palm & Treo: Everyone Wants A Slice
I never cease to be amazed by how much rubbish, nonsense (sometimes blatantly deceptive and manipulative or simply ignorant) articles/posts/reports about Palm and our Treo some quarters are able to produce on such a seemingly regular basis.
The latest round of rumours follows the purchase a few weeks ago of 6.3 million Palm shares (about 6.2 percent of the company’s stock) by a major hedge fund called Galleon Group LP.
Naturally, analysts and investors immediately began to speculate about Galleon’s investment rationale and concluded that it was likely an indication of some imminent merger or acquisition – a rumour which rapidly helped to drive Palm’s stock to its highest level in eight months closing above $18 on Friday.
The fact that Palm’s CEO Ed Colligan has clearly and repeatedly stated that Palm is not for sale does not appear to have detracted those who recently proclaimed that Nokia, Motorola and RIM among others were all in the bidding to purchase the company.
I am sure that some Palm shareholders have at some point in the past considered a sale/acquisition but I believe that going ahead with such a sale today would be a very short-sighted move and ultimately a grave mistake as Palm’s future in the smartphone space looks more than extremely promising and the company has not really even begun to reap the full rewards of its hard work over the past few years. The best returns are certainly yet to come.
Aside from allowing shareholders to cash-out I simply do not see what value any of the rumoured suitors would bring to the table. I certainly would not support a sale and instead strongly favour Palm’s drive to continue to grow as a wholly independent company – particularly because I believe that Palm’s assets would be completely wasted in others’ hands as has often happened in the company’s history.
It’s obvious why Nokia, Motorola and others would like to get their hands on Palm. Nokia’s E-Series has had a dismal US penetration and Motorola’s Q has failed to make anything but nominal inroads while the company’s profits were down 48%. In the meantime Palm and our Treo have continued to sail ahead profitably…
Additionally, with a large cash position of $500 million, cash-flows of $120 million in the past 12 months, a well-known and trusted brand, its expanding portfolio of Treo smartphones running both the PalmOS and Windows Mobile, the recently purchased perpetual PalmOS license, a new operating system rumoured to be in the works, its growing worldwide carrier relationships (such as its new cooperation launching the Treo 680 with China Mobile – the world’s largest mobile operator with more than 240 million subscribers – announced today), the secret product code-named “Sherlock” that founder Jeff Hawkins is said to be working on as well as the many new Treo smartphones and carriers due to be announced in the coming months Palm is certainly a very attractive successful company.
Incredibly though, with all of this some people still have the audacity to state that Palm has not managed to keep pace with Nokia, Motorola or RIM!? I would really like to ask them what colour the sky is on their planet…
The main issue for me appears to be the almost complete continued lack of vision that analysts and investors have of the emerging smartphone revolution and the leading role that Palm has and will continue to play in it.
It’s been nearly three years that some quarters have been trying to convince me that Palm, the Treo and/or the PalmOS “are dead” – a period during which Treo smartphone sales grew to over 5.0 million units and Palm’s profitability along with it. I believe that these analysts were clueless then and remain clueless today.
It’s true that more competitors have entered the smartphone market and I have no doubt that a great many more will continue to appear like Apple’s iphone due later this year (see Apple’s iPhone Wake-Up Call) but so what? Every new entrant has thus far failed to win a mass following while Treo sales have been reinforced by each additional player’s marketing spend and their efforts to bring credibility to the smartphone space.
As the pace accelerates and new players of all sorts pour billions of dollars trying to grab a share of the pie I personally have no doubt that the Treo will continue to grow even faster as the benefits of owning a smartphone – a Treo in particular – become increasingly obvious to everyone.
Treonauts always grow stronger… 
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Comments
Dear Mr. Davis:
I read your editorial, “Palm & Treo: Everyone Wants A Slice”, with interest. While I applaud your enthusiasm for the Treo, the basis for your optimism is exactly why now is the opportune time for Palm to find a better financed, more skilled partner.
Yes, the Treo is doing well. . . at the moment. But its long-term success is far from certain as much of its success is built on old technology, good engineering from the Handspring group Jeff Hawkins assembled, and the failure of its competitors to capitalize on their technological advantage.
The Palm Operating System is showing its age. And, while I personally prefer it to Windows CE, the fact is that the CE platform is far more flexible and better suited for adaptation to the forthcoming streaming video, multi-media applications and a robust WiMAX protocol which will soon be the metrics by which higher end cellular ‘phones are judged.
Palm has had remarkably little success in porting their OS to Linux, which would provide the much needed facilities to meet the demands of the WiMAX driven portable video revolution now beginning to unfold. And, since the news of the sale of the Palm software development group to the Chinese, ears eager for good news have been met with a resounding silence.
Palm’s reputation for building serviceable hardware has been seriously damaged by the problem-plagued LifeDrive. As a LifeDrive owner, and I am on my fourth replacement unit in nine months, I am not really comfortable depending on the same engineering or quality control for my mobile communication system.
You are correct in observing that there is a good future ahead of the smart ‘phone. My guess is that it will evolve into the portable computer of choice in the not too distant future. But Palm lacks the expertise, the technical know how, the budget, and the marketing skill to promote the Treo much beyond its present stage of development.
Nokia could be a useful partner and they need a better product as their Symbian based smart phones have attracted little interest. Even better, Motorola desperately needs a high-end product to offset the lukewarm, too little too late, reception of the Q.
If the Treo is to survive, a technologically sophisticated, well financed partner with good market penetration is essential now.
The watchword on Wall Street has always been “Sell on good news” and that time is now. With a major investment, lots of effort and a fair measure of good luck, the transfer of Palm into stronger hands may well turn out to be the best news of all for those of us who love our Treos.
Kingfish
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