Having said a year or so ago that we did not see an independent future for Palm as a handset vendor, there is little to add to the news this week that it has put itself up for sale. And while the cellular market is not the primary concern for Faultline readers, the continued existence of Palm’s WebOS and the amount of wasted words which have been written on Palm, primarily for the US investment community, make it worthwhile spending perhaps a few scant moments on this outcome.
The investment stakes involved in supporting a mobile platform, be it a full operating system or version of Linux, such as Android, are high and getting higher each day. Apple raised the stakes when it created the iPhone because of iTunes ‘ all handsets that want to offer a full suite of music and video services, need a store, and most of them now have one. Nokia and Sony Ericsson have their own music platforms and Android and RIM have their own stores ‘ but this meant that Palm needed a music platform.
Beyond that the App Store of the iPhone and a variety of operator factions has meant that the investment in a mobile platform would go up yet again ‘ and once again Nokia followed with Ovi and the others picked up the pace of their App Store introductions, but the clearest winner here is Android, with many of the Apple Apps on their way over to Android Market.
These raising stakes mean that no-one is going to want Palm’s WebOS, and before you start yelling about what a nice environment it is to develop in, remember that Symbian was the worst development environment ever built (in some people’s minds) and yet it still dominates smart phones. It’s not about the quality of the code or SDK, but the reach of the platform and Palm has such a poor reach.
Palm has been a member of the walking dead for at least 18 months and the Palm Pre and Pixi were never going to save it, although they might have given it a future of some kind ‘ however their subsequent failure to engage sufficient consumers means that this potential is probably also now gone. Of course Palm will be bought, but all those arbitrageurs out there leaping into the stock to push up the sale price, should begin to worry immediately that they will never get their money back. If Palm sells based on a valuation brought about by winding down development and merely supporting its current installed base, then it will be woefully short of the price surge that it went through this week which added 50% to its valuation.
An investor told us this week that we were silly to expect the investment community to take notice of our dire predictions for Palm, because we were only taking about an end point. There would be many rises and falls in the price of Palm stock before that end point became obvious to everyone. We see their point. Faultline cannot say for sure that someone won’t buy the company, perhaps Lenovo or HP might take a peak ‘ there are plenty of people out there which will make the mistake of feeling that the stock and assets are a bargain. There are those suggesting that one of the Chinese handset companies will be urged by the Chinese government to buy the company ‘ with the promise that China might like to see Android shunned in China, and WebOS put into its place.
But Android is pushed by China Mobile in the form of the oPhone and relies on the open source nature of the Android code. Google makes not a penny off the code and has no control over the oPhone environment even if its apps run unchanged in China. Perhaps a government would consider endorsing an operating system that blocks most of these Apps but it would gain nothing in terms of reduced royalties for its companies or reduced costs for Apps or offer it an exportable platform for Apps. It might give Google a problem when it comes to creating a viable Chinese strategy, but it already has that problem and in our view it’s not worth $1 billion or more of spite over a censorship battle that China will continue to have with all the Western civilizations and all their companies.
The simple truth is that once, before remotely loaded Apps on mobiles, an operator could make its devices appear different. Now that the App genie is out of the bottle, whatever one operator can do on one handset, can be almost immediately copied on another. That is now part of cellular history, and it cannot be reversed, so why would China put one of its own at a disadvantage.
HTC is said by US media to be interested (we have considerable doubts about the veracity of this), but we suspect that IF this is true, it comes purely from how low the price has gone and the fact that HTC would quite like a brand of its own (it made white label phones until about two years ago) and one that is recognized in the USA at that.
No, Palm’s suitors are likely to be as shortsighted as those investors that have made it their darling over the past 18 months. Trading Palm during that time has been like trading cans of Tuna (in the famous joke) which were long past their sell by date. When a desperate trader realized that he could not offload the tuna, instead of holding them until someone unwary came along, he sold them to a retailer who opened one, found they were all off, and threw the lot away and demanded his money back. The trader in turn went back to the trader who had sold the Tuna to him and said ‘I also want my money back,’ the trader refused and explained, ‘These were tuna for trading, not for eating.’ Palm has been a stock for trading, not for eating, for some time.