Palm: Up For Sale or Down for the Count?Palm: Up For Sale or Down for the Count?

Even with a new owner, Palm will have to discover a niche in which they can prosper or there will be a short coda to this song.

Bloomberg.com reported today that Palm Inc. is working with Goldman Sachs Group Inc and Qatalyst Partners to find a potential buyer for the company. Taiwan based HTC is apparently interested, though they already have significant developments in Android and Windows Mobile devices. Huawei, Lenovo, and Nokia have also been mentioned as potential suitors, and Dell apparently gave them a look but passed.Palm was banking on its new line of smartphones based on their WebOS introduced last June, but even then their success looked like a long shot. The stock has plunged more than 60 percent this year, dragged down primarily by disappointing sales of the WebOS-based Pre and Pixi phones. It did surge 32 percent last week on takeover speculation. Palm has a special place in the mobility market. Founded in 1992, Palm helped pioneer the market for handheld organizers or personal digital assistants (PDAs) with its PalmPilot devices. Palm hit the market at roughly the same time as Apple's ill-fated Newton (for which then Apple CEO John Sculley reportedly coined the term "personal digital assistant"), and when the Newton petered out by 1998 Palm had the lion's share of the PDA sales.

Palm was acquired by U.S. Robotics, which was in turn purchased by 3Com Corp; 3Com spun off Palm in 2000. The real leap for Palm came in 2002 when Handspring introduced the Treo smartphone that combined a cell phone with a Palm OS-based personal digital assistant; the first BlackBerry was introduced the same year. Nokia and Sony Ericsson had taken a stab at smartphones, but Handspring got it right. IBM can claim the title of being first with the smartphone based on its Simon product introduced at Comdex in 1992.

Handspring was actually founded by Jeff Hawkins, Donna Dubinsky, and Ed Colligan, the inventors of the Palm Pilot and the original founders of Palm Computing. They left Palm and founded Handspring in June 1998 after Palm's acquisition by 3Com. Handspring later merged with Palm, Inc.'s hardware division in 2003 to form palmOne. Palm later brought out models that used Windows Mobile, but their last great hope was the WebOS used on the Pre and Pixi models, but a disappointing launch with Sprint followed by an equally disappointing introduction with Verizon seems to have sucked the wind out of their sails.

To see Palm fail would be truly disappointing. The Treo ruled the smartphone space at a time when the consumer's vision of the smartphone was a lot different from what we have today. There were some "apps" for the Palm OS, but they were about as exciting as scientific calculators and business expense recording programs. Most users stuck with the simple out-of-the-box address book, calendar, and notes functions that you got to with the four fixed function keys on the original PalmPilots. We all learned how to do the "Graffiti" handwriting recognition, and I'm still faster at that than I am with my BlackBerry keyboard.

Palm did understand one of the important factors in mobile device design: do a few things but do them well and do them simply. BlackBerry has continued to capitalize on that basic concept and the iPhone simply took the entire idea of what a smartphone could do to another level. For the moment it appears that apps rule, and as my friend Jim Burton of UC Strategies so aptly put it "Apple has sucked all of the air out of the room." It remains to be seen whether the app appeal has legs, but for now it has put Apple in a unique position in the market.

With RIM, Apple, and Android commanding most of the attention, it will be difficult (if not "impossible") for anyone else to squeeze their way in. With their overall scale and the running start from the previous versions of Windows Mobile, Microsoft may have a shot with Windows Phone 7. However, the old Palm base has drifted away to BlackBerry and iPhone so they are starting from ground zero. Even with a new owner, Palm will have to discover a niche in which they can prosper or there will be a short coda to this song.Even with a new owner, Palm will have to discover a niche in which they can prosper or there will be a short coda to this song.