Palm Must Beat Others to Prosper

In saying, "We don't have to beat each other to prosper" during a Thursday call held to discuss the company's fourth-quarter earnings, Palm's new CEO, Jon Rubenstein, has tacitly admitted what many already suspected: Palm won't end up number one in the smartphone race.

"Only a handful of companies have the software and product design capabilities" to gain significant market share, he said. "There's room for three to five players in this space. We don't have to beat each other to prosper."

Three-to-five, huh? So let's count and see who Palm has to beat to remain in the race. Off the top of my head: Apple, RIM, Nokia, Motorola, Samsung, Acer, LG Electronics, T-Mobile, and Sony Ericsson all offer smartphones or have announced plans to do so.

Of those nine companies, which four to six do you expect Palm will beat in order to be among Rubenstein's prosperous three-to-five? There are some fairly obvious candidates, but if the winners only run three deep, Palm must beat two of the industry's powerhouses: Apple, RIM, Motorola, or Nokia. Which ones will it be?

I know, Motorola, but who else? Nokia isn't known for its smartphones, but has a master touch for reaching the masses. RIM probably will stumble at some point, but probably not on Palm's schedule.

The upshot of this, again based on the comments of Palm's new CEO: The company faces some pretty tough sledding on its way to prospering.

Rubenstein wouldn't say how many Palm Pres have been sold since Palm introduced it on June 6. I take that as a sign that it's not a hugely impressive number. With Apple selling more than a million iPhone 3GS units, basically over a long weekend, even an optimistic 100,000 Pre's isn't very impressive.

A million downloads so far, a number Palm is willing to release, doesn't really tell us much, though it's more impressive than if Pre customers had only downloaded one or two applications each. Still, 10 downloads per Pre seems high, but I can find no credible estimates of Palm selling more than 100,000 or so units so far.

There are approximately 40 apps available for the Pre, according to published reports. By comparison, Apple's App Store offers more than 50,000 titles.

The Wall Street Journal said analysts expect another 200,000 Pre's to sell "in August," which since July is never mentioned I am guessing to be a typo. The correct wording should probably be another 200,000 "by" August.

Rubenstein would only say Pre demand is "strong and growing," but he could be expected to say that in the face of anything but total market rejection, which the Pre most certainly does not suffer from.

Will Palm land in the prosperous three-to-five? Bottom line, despite its CEO's comment, the company absolutely will have to beat someone--several of them--to land close to the top of the market.

Can Palm do so? This morning, I am feeling optimistic and want to think the "prosperous" list will end up including five players, not three, and that Palm will beat some rivals and be on the list. But in order to do so, it will need to sell many more phones and be supported by a vibrant developer community.

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