Where does Palm go from here?

The Palm Pre has been reviewed, praised and released. Now the big question for Palm is: Will webOS have legs?

Palm went to lengths to point out during the months-long build-up to the Pre's June 6 launch that the Pre, in itself, was not what was going to determine the fate of Palm--webOS would. That's great as a philosophy, but is it a sound business model? More to the point, what is Palm's strategy going forward?

Will Palm be a self-contained hardware and software maker, like Apple and BlackBerry-maker Research In Motion? This would give Palm control over the implementation of webOS across a line of Palm-made devices in a variety of form factors, suited to the needs and desires of carriers and customers alike. Since December 2006, when Palm paid Japanese firm Access $44 million for rights to the source code for Palm OS Garnet, Palm's hardware and software shops have been under one roof. Palm could reasonably be expected to continue with this direction.

The downside? Apple and RIM are still Apple and RIM, and, according to the latest research from Gartner, are cementing their growth in the smartphone market. Betting on foul-ups by competitors is not a sound business strategy.

Another option Palm has is to license webOS to other handset makers, the way Microsoft does with Windows Mobile, or make it an open-source platform as Google has done with Android and the Symbian Foundation is doing. Licensing webOS would give the platform greater reach, and if the operating system is as revolutionary as Palm claims, handset makers will jump at it.

The likelihood of this happening, however, is probably slim. Why? First off, it's not as if handset makers lack OS choices. And secondly, if Palm intended to make money off licensing webOS, it could run into the same quandary Microsoft is facing with Android: How do you compete with something that is open source?

Maybe it's a false choice. It's still early days yet, and Palm appears to be taking the long view.

"With the appointment of Rubinstein to CEO, that implies a bet on their ability to succeed in the long term on their own merits," said John Jackson, vice president of research at CCS Insight. Jackson said that Palm is betting on its software asset, webOS, to become a "platform for prolific, sustained innovation."

AT&T and Verizon Wireless have expressed interest in Palm, webOS and the Pre, which is a welcome vote of confidence. Carrier deals are never to be sniffed at.

Palm is also betting that developers will flock to webOS, and rightly points out that the iPhone 3G did not have many applications when it debuted. Give Palm time to cultivate the webOS development community; indeed, Eric Kowalchyk, the product manager for the GoPayment app from Intuit, said that the flexibility of webOS was a key factor in Intuit's decision to support the platform.

But the comparison of Palm to Apple, and the Pre to the iPhone, is not really valid, as Jackson notes. Apple views the iPhone as a platform, and it has a highly visible channel for developers looking to make money, he said. The Pre and webOS don't have that. What they do have is the allure of innovation, the glow of the possible. But time is ticking for Palm.

"There a number of plausible strategic scenarios that still exist for Palm," said Jackson, including a sale to a company like Dell. But the onus remains on Palm to choose the strategic scenario that makes the company the engine of innovation it once was, and that its investors and new CEO hope it can be once more. --Phil

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