Some analysts and investors have debated whether Palm made the right decision last week when it chose to abandon Microsoft’s Windows Mobile operating system in favor of an exclusive commitment to webOS.
In making the announcement, Palm CEO Jon Rubenstein said the following:
“Due to the importance of webOS to our overall strategy, we’ve made the decision to dedicate all future development resources to the evolution of webOS, which means that going forward, our road map will include only Palm webOS-based devices. . . .
. . . . We are going to be focusing all of our effort in the future on building webOS products. And so while there are still Centros and Treo Pros moving through the (Windows Mobile) channel right now, our future engineering efforts are based around webOS because we are absolutely confident in where we are going with webOS.”
I understand the reasoning put forward by those who questioned Palm’s decision. On a quarterly basis, Palm is suffering from steep declines in year-over-year revenue; and the Palm Pre, in limited release, doesn’t seem to be doing as well as some had expected and hoped it would.
In ending its commitment to the Windows Mobile-based Centros and Treo Pros, Palm has discouraged consumers from purchasing them. Revenue from those products will recede even faster and more severely than would have been the case had Palm chosen to allocate a modest percentage of keep-alive resources to them.
Nonetheless, while I sympathize with the position of Palm critics, I don’t agree with it. Palm had to commit unambiguously and unreservedly to its homegrown mobile OS. It isn’t a big enough company to have one foot planted in Microsoft’s Windows Mobile camp while trying to make meaningful strides with webOS. It would have tripped over its own feet.
Palm isn’t a hedge fund; it’s a technology company. It must have the courage of its convictions or risk becoming irrelevant. Palm might have become just that if it had attempted to juggle resources in a bid to marginally extend a diminishing stream of Windows Mobile revenue.
Now, though, it has a chance at survival, at emerging as a strong alternative to a smartphone market where the long-term winners appeared destined to be Apple in the consumer sphere and RIM in the enterprise realm.
It won’t be easy. An armada of Google Android-based smartphones will hit the market’s high seas before the end of this year. Those much-hyped and eagerly anticipated competitors will gain an inordinate amount of media coverage and industry buzz. Meanwhile, Apple won’t stop innovating, and RIM will continue to do its best to prevent encroachments on its enterprise turf.
Windows Mobile, though, is a spent force. I don’t see how Microsoft can revive it. The Windows Mobile 6.5 release won’t do it, and neither will next year’s Windows Mobile 7.0. The only possible road to redemption for Windows Mobile would be to refocus entirely on enterprise applications and markets and hope to chip away at RIM’s market share.
I will say it again: Microsoft has a lot of expertise and knowledge, and it remains stocked with plenty of smart people, but it doesn’t understand consumer markets. It does poorly in assessing the needs of consumers. Not surprisingly, it does just as poorly in designing and developing products for consumers.
That means Palm’s objective is to position itself as a viable top-three vendor. It has a chance if it can withstand the initial onslaught from the gaggle of Google Android licenses. Much depends, then, on whether on this impending wave of Android-based devices is favorably received. I think the initial buzz for the Android smartphones will be intense, but I wonder about their staying power — and I wonder about Google’s commitment to Android.
I’m probably in the minority, but I’m not persuaded Google will go to the mat to defend a mobile operating system that isn’t essential to its business. Google services don’t have to run on Android, as Google’s application support for the iPhone attests. Google can still generate service and advertising revenue without Android, though it would have more control over the presentation and delivery of those services and advertisements if it owns the mobile platform on which they are delivered.
If Android wobbles — if developers don’t support it with a a sufficient quantity of high-quality applications, if handset manufacturers waver if their first Android handsets don’t reach sales targets — will Google cut or run? I’m not sure of the answer.
Getting back to Palm, it will have to weather an intense storm. It will have to stay the course, it will have to get better at marketing itself and its devices, and — most important of all — it will have to win the hearts and minds of application developers and relevant content creators.
Can it succeed? I’m not Nostradamus, but Palm’s unalloyed commitment to webOS suggests it will at least put up a good fight.