by Jean-Louis Gassée
Who will buy Palm?
If you’re in a hurry: no one.
If you have more time, here is the sad story: in one day, this past Friday March 19th, Palm shares collapsed, -29% in one Nasdaq session, closing at $4. The obvious question is why? But a second query immediately comes up: why $4, why not zero?
For months, the Wall Street “sentiment” — I didn’t know there was such a thing there — let’s say the calculation was this: ‘Sure, Palm’s cooked but one of the Big Players will buy it.’
By “cooked” the haruspices meant Palm had no future as an independent company.
You’ll recall the sky-high expectations raised by its main investor, Roger McNamee, from Elevation Partners, a private equity firm. (Since October 2007, Elevation Partners has invested $460M, 25% of its $1.9B fund in Palm, for 30% of the company.)
In March 2009, Roger claimed the just announced Palm Pre would cause iPhone users to switch smartphones: “June 29, 2009, is the two-year anniversary of the first shipment of the iPhone. 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. Your two-year contract has just expired. Look around. Tell me what they’re going to buy.”
Palm quickly disowned such statements, but the damage was done, lofty, out-of-reach expectations were set.
Apple said little but announced a new iPhone model and lowered prices to $99 for the older model in June 2009, just one week after the Pre shipped. Worse, Palm’s “savior” and “iPhone killer” smartphone suffered from a lethal combination of self-inflicted problems: ingenious but clunky hardware implementation, promising but buggy software, restricted SDK (software tools for applications developers) availability and sophomoric cat-and-mouse games with Apple over iTunes synchronization, to name but a few.
Most of the saga is documented, or opinionated here at Endgadget, one of the more “animated” high-tech blogs.
Now, Palm’s CEO, Jon Rubinstein (a.k.a. Ruby) offers his own if-only-coulda-shoulda-woulda explanation: according to him, bad luck struck Palm when Verizon launched Motorola’s Droid two months before shipping Palm’s Pre. This type of lame explanation is embarrassing. Jon always knew Verizon to be a better channel than Sprint, 91 million subscribers for Verizon vs. 48 million for Sprint. What very probably happened is this: initially believing his own propaganda, Ruby didn’t want to yield to Verizon’s demands. Palm’s CEO bet a successful launch with Sprint would cause the bigger carrier to come around — only to take a less advantageous deal later and too late. By then, everyone knew about the Pre’s tepid reception at Sprint, taking any leverage away from Palm in discussions with other carriers. More