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Preparing for the Pre: Palm and Sprint must get it right

By , Network World
March 30, 2009 08:31 AM ET
Palm Pre

Network World - Palm and Sprint have put a huge bet on the Palm Pre smartphone, due out by June. If the Pre fails, it could sink Palm and badly wound Sprint, its exclusive U.S. carrier.

Slideshow: Palm Pre vs. Apple iPhone - How they stack up

The Pre was unveiled in January at the Consumer Electronics Show, sparking a jolt of excitement. Both companies say that the 3G smartphone with its innovative webOS and multi-touch user interface is on schedule. Everything depends, say a squad of analysts who track the mobile space, on a smooth execution, a marketing campaign that can fuel user anticipation, a user “experience” with both device and network that will satisfy that anticipation, and enthusiastic backing from software developers.

Whether the companies can pull it off is something analysts are divided over.

“The Pre should be very successful,” says Philippe Winthrop, director of business mobility solutions for Strategy Analytics, a research firm based on Newton, Mass. “It’s a great user interface that addresses many of the frustrations people have had with the iPhone, especially the lack of a physical keyboard.”

“I looked at the Pre and thought, ‘cute.’ But this is a company that’s abandoned it’s developer community, and to some degree its customers,” says Michael Disabato, vice president, networking and telecoms strategy service, with Burton Group, a technology research firm based in Midvale, Utah. “Now, hook them up with a [cellular] carrier that’s languishing. That’s a recipe for disaster.”

The numbers may not prove Disabato’s point, but they do show how much is riding on the Pre for both Palm and Sprint.

Palm’s most recent quarterly financials show how much is riding on the Pre’s success. The company lost $98 million in the third quarter, compared to $57 million a year earlier. The company sold 482,000 devices in the period, a plunge of 42% year over year. Analysts speculate that demand for Palm’s older PalmOS handhelds and some of its Windows Mobile handsets is being hurt as potential buyers decide to wait for the Pre. Palm executives say they expect the fourth quarter to be equally “challenging.”

The stock price got a slight reprieve when a Deutsche Bank analyst raised his target price for the stock, from $2 to $12, specifically due to confidence that the Pre, and as yet-unnamed additional form factors also using Palm’s new webOS software, will be successful.

Sprint’s performance was even worse, reporting in February a $1.2 billion loss for the just-ended fourth quarter, and continuing to shed customers, even as it attempts to create a brand new 4G data service by wholesaling WiMAX connectivity from its joint venture, Clearwire.

Sprint recently confirmed the service plans that will be available for the Pre, but neither company yet has revealed anything about the phone’s final price.

The key question is whether users will want the Pre, enough to switch from existing, older Palm products, or to upgrade from an existing 2G phone to a 3G device. In general, analysts say the Pre has a good chance to generate the same kind of excitement as Apple’s iPhone.

“This is not your father’s Palm,” says Ramon Llamas, senior research analyst, mobile devices, at IDC, a market researcher in Framingham, Mass. “The Pre and webOS are vastly different [from the older Palm platform].” Pre’s strength’s include its slick multi-touch screen and UI, with a full slide-down QWERTY keyboard, the simplified on-screen navigation among various applications, and the integration of information across applications.

“The device and the OS are fresh, and appealing,” says Winthrop. “It’s a monumental leap forward from the legacy PalmOS devices.”

Burton Group’s Disabato, who had been using Palm devices for years until he switched last year to an iPhone, is less impressed. “It’s similar to the PalmOS interface, which I thought was a good interface, but it’s nothing earth-shattering,” he says.

He wonders if the Pre will even match the utility of his last device, a Palm Tx: he could use a portable infrared keyboard, the Documents to Go application from DataViz, put the Tx in landscape mode, and type Microsoft Word-compatible documents on the tray table of a jet. “Apple still can’t do that even today with the iPhone,” he says.

Frost & Sullivan Vice President Gerry Purdy thinks Palm will be able to successfully leverage the Pre’s multi-tasking capability to create a new value for mobile users. “The whole Palm organization is known for its [emphasis on] ease of use,” he says. “In the past, you couldn’t do two things at the same time, running a background operation or another app while were on a phone call or receive e-mail. With multitasking, you can.”

Purdy’s point is that multitasking allows a degree of integration and interaction among applications and data sources that either can’t be done today or can only be done with great difficulty. “Take a simple example: you’re looking at your calendar, and the system can add [automatically] a weather update based on your GPS location. Instead of treating things as ‘silos,’ you’re treating them as ‘mobile mashups’ to create an experience that makes sense for a specific mobile user in a specific location.”

The creation of such experiences hinges on software and software developers. Palm has given a sense of the possibilities with its Palm Synergy application, which links up Outlook, Google, Facebook and other calendars to one location. Similarly, the Pre’s Universal Search feature lets users work with a single search bar to hunt for information across Pre-based and Web applications, contacts, dialing information and so on.

“It’s the ability of the system for developers to integrate multiple pieces of information into a given user experience,” says Purdy.

Disabato is not optimistic that PalmOS developers will embrace webOS. He points out that Palm cut the ground out from under these developers, without input from or warning to them, by shifting to a new OS platform. IDC’s Llamas says Palm has been courting this group, and working to give them the tools and resources they need to be successful with the new OS.

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