Palm faces an uncertain future
Published: 22 Mar 2007 08:49 GMT
Palm pioneered the smartphone, but if rumours prove true, the Treo maker may not survive as an independent company to watch its creation move from the corner office to the street corner.
The Sunnyvale, California, company in recent weeks has been the subject of increasingly noisy takeover talk, with everyone from private equity firms such as Silver Lake Partners and Texas Pacific Group to handset makers such as Nokia and Motorola purportedly interested.
Those rumours say a deal could be announced as early as Thursday, the same day Palm is scheduled to announce the results for its most recent quarter.
While it's hardly expanding at Google-like rates, Palm is still, in fact, growing. The company is expected by most analysts to beat the modestly disappointing guidance it issued last quarter after its latest model, the Treo 750, was delayed. Palm expects revenue of $400m to $410m in the quarter that just ended, up from $389m in same quarter a year ago.
Meanwhile, Palm managed to push more Treo smartphones out of the door in the last quarter of the 2006 calendar year than in any other quarter. In 2005, Palm shipped two million Treos worldwide, and in 2006 that number climbed to 2.4 million, a 20 percent increase. The major US mobile carriers continue to stock both the Palm OS and Windows Mobile versions of the Treo. Its carriers bought 617,000 Treos in the last quarter of 2006, a record, and a 42 percent jump over the previous year.
That sounds good until you add some context: the smartphone market grew 50 percent in the same time period, to 73.9 million units, according to Gartner, and Palm now has a meager 3.2 percent share of the market.
Why the disparity? Some say it's because the Treo has become tragically unhip.
"The problem is that the Palm product is relatively old, the design has not changed substantially since September 2003 with the Treo 600," said Todd Kort, analyst with Gartner. "But that's a bad thing in a fast-moving industry like this where we've moved to thinner and cheaper devices. The Treo is looking fat, heavy and expensive."
The clock is ticking for Palm, Kort said.
"Things could still go reasonably well for Palm for another six months or so, but I think longer term, the hardware problems, the operating system problems are going to catch up with them," he said. "That's why it makes sense for Palm to be shopping themselves around now before thing go down the tubes."
Old rumours, new details
Although Palm has been a regular target for takeover speculation, the latest round of rumours has an unusual amount of detail. In February, Palm was reportedly seeking a suitor. Then came a report in The Wall Street Journal two weeks ago that said the company had retained Morgan Stanley to look into a potential merger or buyout. On Monday, the technology blog Unstrung, citing unnamed sources, claimed a deal is in the offing and that Morgan Stanley preferred to close a deal by Thursday, the day of the company's quarterly conference call with investors.
Not surprisingly, Palm isn't talking. "We try to make it a practice and policy not to comment on rumours and speculation," said Palm spokeswoman Marlene Somsak.
Getting bought out by a hardware manufacturer could mean the Treo would get branded under that manufacturer's name. And the Palm OS — which has been stalled at version 5.4.9 — could be…
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