It's on the Now Network but not on the network now

8 January 2009

In fact, it's not clear just when Palm's new baby, the Pre smartphone, will actually go on sale. The company will probably have to deal with a lot of criticism as to why it's locked the phone to one operator, Sprint, at launch at least. However, that might suit the company best.

Roger McNamee, co-founder of Elevation Partners, which has pumped hundreds of millions into a company that has been losing money hand over fist in recent years, even ahead of a major recession, told the New York Times that a slow start for Pre sales would suit Palm just fine. It would certainly keep the cashflow steady.

“Given the economy, a perfect outcome would be a critically acclaimed start followed by something like the early days of the iPod, where every buyer loved the product, but unit volumes started small and grew with time,” Mr. McNamee said. “In the 1.2-billion-unit cellphone market, you don’t need much market share to generate billions in revenues.”

Irony surrounded the unveiling of the Linux-powered Pre, although some of it was probably lost on Sprint chief executive Dan Hesse when he told the audience at CES that his company has the most "dependable 3G network". While live-blogging the event, Ryan Block wrote: "Sprint is crapping out on us." It might have been the time for Sprint to make sure it had a picocell in the Las Vegas Convention Center. Not the Now Network but the Not Network.

When, during Steve Ballmer's keynote, Robbie Bach was shown demonstrating Windows Mobile on a Treo only one day ahead of its maker explaining why you probably don't want one, I was reminded of when I wrote on Palm's trials in 2007. Back then, as I did the research, I wondered why the company didn't just cut its losses, dump the OS research and just do what it wanted to do on top of Windows Mobile. With a Linux base, Palm would lose the heavy licensing cost but, in 2007, Windows Mobile was responsible for an increasing proportion of Palm's sales, although the company was keen not to shout about that. And the risk of developing a handset OS from scratch remains. Yes, it looks very nice but Exchange sync, as both Microsoft and Apple have found, is troublesome – it can kill your battery stone dead if implemented badly.

It looks as though Palm has dodged the curse of the Faileo this time around. From the reaction of people at CES, the user interface looks to be fluid and in the spirit of what people now expect from a smartphone, having broken away from the old desktop metaphor of PCs and made something that carries more the illusion of a physical desk.

As Michael Gartenberg points out – he reckons Palm is back – the key to the Pre's success is execution. Will it actually work? The LifeDrive was a good concept for a PDA but sucked as a product. The Foleo was not a bad idea – having pre-empted the netbook rush – but messed up on the details. And the many, many missteps with PalmOS...

Peter Rojas tweeted that the Pre could be good but Palm, through its stumbling, allowed other OSs to become entrenched. I'm not so sure that any of them are entrenched. The question in 2007 was whether Palm would have enough money to make it to a 2009 smartphone launch. In fact, it didn't. It's taken a second call on Elevation's cash to get to launch and McNamee's hope for a gentle start implies that the private equity people aren't ready to pump in more to support a massive increase in production capacity at whichever Chinese factory is going to turn these out. It only support EV-DO, not UMTS. But then, why fight Nokia on its home turf when all you need is a slice of the business centred on CDMA?

The whole mobile OS business is very strange right now. As Gartenberg says: "There is no Windows of mobile."

Symbian should be the OS that everyone talks about. It has the market share. Yet, it's not the first name on anybody's lips. One reason is that a lot of the buzz comes from the US, where Symbian does not do at all well. Windows Mobile is arguably the most entrenched. Yet, I am never left with the impression that anyone actually likes it. Not even companies making money from selling it, like Palm.

Android is a contender for entrenchment. But people have discovered, as with the iPhone 3G, that bad battery life can seriously damage their love for the G1. Rojas pointed to the polish that Pre has versus Android. I argued, some time ago, that the biggest problem with Android and Limo by extension, was the idea among the established handset makers that they thought a leading handset OS would just happen and they could take it as-is and bung it on a phone:

"Phone makers want two things: to create a must-have product that nobody else can make; and to spend next to no money making it. They haven't quite worked out that the two are mutually exclusive."

I'm still not sure any of them have learned the lessons of the iPhone, or where Windows Mobile has failed to shine. Android still has a chance. Limo? The lights are on but...

Then there's the iPhone and the Blackberry. These probably do qualify as entrenched but RIM has stumbled with the Storm. And, as McNamee says, it's a very, very big market out there. Apple's vice-like grip over application development will help Palm in the short-term. And Blackberry's difficulties getting out of the enterprise business provide Palm with an opening.

What about applications? Palm claimed Pandora ported their application to the Pre in three days. That implies that the Pre runs Flash and not a cut-down version at that – they seem to be using a TI-made ARM Cortex-A8 processor that is currently used in most of the non-x86 netbooks.

If Palm is smart, the company has adopted some of the Web 2.0 frameworks. They look to have cut any ties with PalmOS 5, but to have a compatibility mode would probably have meant extra cost and complexity with not all that much benefit for the kind of web-oriented applications Palm is looking to attract. This is a machine for things like Evernote and Google Docs, running Gears and AIR not Documents To Go.

So, where will it all go wrong, go wrong, go wrong...? Power consumption is probably going to be tough to crack as it seems to take everyone time to work out. And the other people have more money. Palm's history on software implementation, at least in recent years, has not been good. It was a good-looking demo but how much was real and how much was Memorex?

If Palm succeeds, it says as much about the handset industry's failure to deliver as much as Colligan and company's ability to pull off what would count as one of the biggest turnarounds in history. Post-1997 Apple managed it.

Palm is faced now, however, with two short-term problems. Getting the Pre out on time, and dealing with the inevitable drop-off in sales of Windows Mobile-running Treos while prospective customers wonder what the Pre will actually cost them.