10 Reasons Palm Failed And Had To Sell To HP

jon rubinstein

Make no mistake: Palm’s $1.2 billion buyout by HP is not something to celebrate. (Unless you bought Palm shares at $1.14 in December ’08.)

Palm was on its way to going out of business, and HP saved it because it thinks WebOS can kill Windows. (Good luck.)

Meanwhile, there’s no bidding war going on right now.

Why not? Because Palm 3.0 — under Jon Rubinstein, the former Apple executive — was a failure.

The company did a decent technical job building a new mobile platform, WebOS, which is basically what HP is buying.

But everything was too little, too late.

Palm gave Sprint too long of an exclusive to sell the Pre and Pixi

Palm's long exclusive tie-up with a shrinking Sprint Nextel -- in the middle of its own lame comeback attempt -- meant Palm's resurgence was screwed from the beginning.

Ideally, Palm never should have used Sprint Nextel, the shrinking no. 3 U.S. wireless carrier, as its launch partner for the Pre. But we're assuming that Sprint was Palm's only choice; that no. 1 Verizon Wireless and no. 2 AT&T weren't interested in a blowout launch gala.

In that case, it never should have given Sprint such a LONG exclusive. It was fine to keep the Pre exclusive at Sprint for a few months. But then launching the Pixi on Sprint also was a huge blow.

And whatever prevented Verizon and/or AT&T from selling the Pre and Pixi last Christmas was a huge blow to Palm. Instead, Verizon put its muscle behind Google Android and the Motorola Droid. And obviously AT&T had every reason to promote its exclusive iPhone above all other smartphones.

Palm never gave anyone a reason to buy the Pre instead of an iPhone, BlackBerry, or Android phone

This was a failure across Palm's engineering, design, and marketing teams. And it's not like Palm is the ONLY company to have this problem.

But if Palm was going to have any chance to compete with RIM, Apple, and Android phones, it needed SOMETHING important that was better, that Palm's marketing people could communicate was better to would-be buyers.

It didn't have that. Everything was too little, too late.

Even after all the hype, the Pre just wasn't that good

Palm was positioning the Pre as a high-end device, and charging what a high-end device was supposed to cost. But the Pre just wasn't that nice.

Its hardware keyboard -- which some thought could have been a big selling point against the iPhone -- was especially bad.

Here is Gizmodo editor Jason Chen using his Pre review unit to cut cheese.

Palm's advertising was terrible

Advertising on TV is an easy way to sell mobile phones. Otherwise, you wouldn't see so many mobile phone ads on TV.

Palm's TV advertising was TERRIBLE. Remember this creepy spot?

More recently, Palm started running ads that did a better job explaining why the Pre was a good phone. Too little, too late.

Palm didn't let developers make WebOS apps until it was too late

Palm didn't let developers have access to its WebOS tools until several months after the phone was announced. And it didn't let developers charge for apps until even later. And only recently did Palm start focusing on games, which it knew in 2008 were a huge hit for the iPhone platform. Again, too little, too late.

By the time developers could make apps for WebOS, everyone knew it wasn't a runaway hit, and that they wouldn't make much money making WebOS apps. That's why there are already more apps for Apple's month-old iPad than the year-old Palm Pre.

The Pixi was an especially lame follow-up to the Pre

Just as people were starting to get familiar with the Palm Pre, the company rushed the Pixi out the door. It was supposed to be a cheap, smaller version of the Pre, with a keyboard. Perhaps Palm was trying to recapture some of the magic it had with the Palm Centro, which was popular with women.

But all it did was confuse people and add more complexity to its small, fragile developer platform.

Instead of making the plastic keyboard a MORE prominent feature, Palm probably should have gotten rid of it. We would be much more interested in a full-touch WebOS device than this.

Palm didn't have the equivalent of an iPod touch

Apple's iPod touch is a HUGE and often overlooked part of the iPhone platform's success. That's because it's cheap, good for kids to play with, gets distributed in different channels than phones, and doesn't require a wireless contract.

A WebOS gadget with no contract COULD have been a cool toy, especially for hacker-types who wanted to try making apps for WebOS, but didn't want to buy a Pre and sign a Sprint contract. In theory, it may have helped Palm get more apps built for its platform.

And of all companies, Palm -- whose legacy is building PDAs without mobile phone access -- is the logical one to build something like this. But it didn't.

We're not saying that Palm would have definitely been successful if it had one of these. But it could have helped.

Palm screwed up the way the Pre syncs with computers by trying to rely on an iTunes hack

Syncing your smartphone to your computer is an important feature to get right. This was an opportunity for Palm to do something BETTER than Apple, but it completely flopped here.

Instead of developing its own awesome sync software, Palm used a hack that allowed the Pre to sync with iTunes. This was a neat trick, but ultimately became a failure when Apple made the obvious move of shutting Palm out.

So instead of offering its users a great custom experience, Palm had to explain why its iTunes hack didn't work anymore. Lame.

(Yes, syncing to cloud services is also important, and Palm arguably does this better than anyone else. But Palm didn't do a good job promoting that feature until recently, when it was too late.)

Palm investor Bono wasted his celebrity promoting BlackBerry instead of Palm

Bono is one of the partners in Elevation, which was Palm's big backer. And instead of using his fame to make the Palm Pre cool, he did commercials for rival BlackBerry.

Talk about adding insult to injury...

Palm's investors made ridiculous statements that damaged Palm's credibility

OK, this didn't damage Palm's phone business, but it damaged Palm's credibility. And it's indicative of the larger, more directly relevant problems at Palm.

Palm investor Roger McNamee of Elevation Partners made some ridiculous claims about Palm in an interview with Bloomberg last March.

'You know the beautiful thing: June 29, 2009, is the two- year anniversary of the first shipment of the iPhone,' Roger told Bloomberg. 'Not one of those people will still be using an iPhone a month later.'

'Think about it -- If you bought the first iPhone, you bought it because you wanted the coolest product on the market,' McNamee said. 'Your two-year contract has just expired. Look around. Tell me what they're going to buy.'

Obviously, more of them bought new iPhones than Palm Pres. And embarrassed Palm had to issue an SEC filing clarifying and retracting some of McNamee's comments. Whoops.

Related: Why HP is buying Palm (to kill Windows) and why it will fail

From SAI yesterday: Why is HP spending $1.2 billion on Palm?

Not just to get into the fast growing smartphone industry, but to end its reliance on Microsoft Windows as the basis for its hardware gadgets.

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