Thursday, March 19, 2009

Palm: Dead Company Walking

Hype around Palm (PALM) is even more surprising than hype around its new product: Palm Pre. Product might be good. Company is not.

I always liked Palm products. Palm TX is my constant companion, combining functions of an organizer, calendar, calculator, spreadsheet, ebook reader, mobile web browser and many more. This is my fourth Palm. This is a great device, although a little bit obsolete. Most Palm products were great, both organizers and smart phones.

Company has great history. Palm created the first usable palmtop computer. Engineers who created Palm Pilot later went to create their own company, Handspring, and created the first smart phone. Later Handspring was acquired by Palm.

The only problem with company: it never found a way to make money. When Palm went public, I wanted to invest in it. This idea quickly died after I scrolled through balance sheet and income statement. Palm was on my watch list ever since, but balance sheet never looked good.

Fast forward to now. Palm shut down its palmtop line. There are several very good smart phones, but company loses to competitors: Research In Motion (RIMM) and Apple (AAPL). New smart phone comes to market, Palm Pre. Judging by reviews, product is very good, if not great. Palm representatives are trying to present is as iPhone killer, but that's too much hype. There are no features in this phone which make it much better than Apple's masterpiece. Even if Pre is a little bit better, it's not enough. If you are second on the market, you product should be much better.

But even if Pre was the best thing since sliced bread, I'm sure that management wouldn't be able to make a dime from it. For more than ten years, company created great products and destroyed capital. Tradition continues.

Full disclosure: at the time of publication author had a long position in AAPL and no positions in PALM or RIMM. Positions can change any time.

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