If a Nokia handset shipped as few as 100,000 phones during a device’s first few weeks, people would be writing it off. If Apple shipped that few iPhone 3G S devices, it’s a failure. But the US market is in a frenzy to predict the numbers of Palm Pre’s shipped and most agree that 100,000 or so units is where it is today, and it is set to reach a quarterly target of 500,000 and close to 2 million by year end. The Nokia N97 will probably pass that in first week’s shipments globally across 75 countries (that’s just 26,000 per country).
And yet there are more column inches spent waxing lyrical on Palm’s predicament, than on Nokia’s more certain fortunes, across all US mobile and investor sites.
The reason for this is partly because many of these investors, before they got their new Blackberry, previously had a Palm in an earlier life, and there is sentimental attachment to a US company ‘ but also because Palm is a far more volatile stock than Noka ‘ it was a company most thought was going bust, and since the announcement at the Consumer Electronic Show in January of the Pre, the company has grown its share value by fives times, to the $1.9 billion it is today. Just delivering the handset has almost doubled the company’s value. If it ships more than 1 million of them, the company will be considered healthy enough to be valued properly on a continuing basis, based on its fundamentals.
However if Wall Street can convince Dell that it really, really needs Palm, the value could jump to a 40% premium above what a traditional fundamentals valuation might fetch. So expect everyone to continually flog this slightly dead horse ‘ Palm needs a rich uncle, Dell needs a proper handset design. It’s a match made in heaven.
But there are some reasons we can think of why Dell won’t buy Palm. First off, it should have bought the company in January, when it could have landed the prize for something under $500 million. On the other hand it may well have approached Palm then or even before and got short shrift.
If Dell is developing its own Android, as most people suspect, with pictures of mock ups with Dell logos leaked into the wild, then it must have started last year. So when the Pre was announced and Palm was at it lowest ebb, Dell could have been $100 million into spending on a new device. We can imagine that conversation being about ‘throwing away your WebOs Palm, because we’re Dell, we don’t do software,’ and Palm saying that WebOS was the post important part of its investment.
And that is the corporate culture at Dell. It is a company that built its own CRM system, which makes PCs to order, and which has never dabbled in software. Which is why Android makes so much sense to it, and Palm doesn’t.
Palm meanwhile, much closer to the handset market, is looking about what a handset needs to do, and much of that in the future is to run applications and that means an App Store and software to personalize it.
So those going around saying that such a deal is “born of mutual necessity and represents a strategic fit for both parties,” are right apart from a deal not being necessary to either. Oh, yes and the fact that it is a strategic misfit.
If it was down to you and I, the deal would be done. If it was down to the two company’s investors, the paperwork would be being drawn up, but while the two companies’ share prices are heading in the right direction (and Dell’s has been doing fine of late as well) and the two management teams have such different understandings of their respective markets, we don’t think any such deal can be done.
And with other PC makers able to put together an Android in no time, Dell must be on the verge of launching one, or it has no intention of getting into the phone market after all. We wouldn’t be shocked however if Dell launched an Android, failed in the market with it, and then bought Palm for a fortune, despite the fact that this would be an even worse idea, because management teams sometimes think that way. It still wouldn’t make it a good idea.