Today’s Palm Forecast: Bleak with Intermittent Periods of Desperation
April 12, 2010 - By Justin E. Gehrke
According to a Bloomberg report, Palm Inc. has put itself on the market, in hopes of a takeover. The company, which was most recently ranked sixth in the competitive North American smartphone market, ironically saw its NASDAQ value surge 32%, when it became known they were actively seeking a takeover. Goldman Sachs Group Inc. and Qatalyst Partners have reportedly been enlisted by the Pre smartphone creator, despite the fact that no official announcement has yet to be made. Originally a Personal Digital Assistant (PDA) powerhouse, the company has been unable to remain competitive, with popular devices such as the Apple iPhone, Google Nexus One, and RIM BlackBerry.
The company holds several patents relating to hardware, software, and power-saving technologies but has been unable to erase market share and financial losses, despite updating its operating system and launching the Palm Pre and Pixi smartphones. Reportedly companies such as Dell and Lenovo have unofficially considered taking over the ailing smartphone manufacturer. More likely suitors, though, appear to be Huawei Technologies Co. and ZTE Corp. Their interest may reflect an interest by Chinese companies, in general, to expand their reach into the international market.
For Palm’s sake, a takeover is necessary to prevent the company from failing altogether. Estimated earnings for the previous quarter were set around $300 million. Unfortunately, Palm Inc. appears to have pulled in around $150 million. Though cash holdings and short-term investments by Palm may be enough to keep them financially solvent through the next several quarters, it is unclear exactly how long they can hold on without some form of outside assistance.
Palm received a boost in 2009, at the Consumer Electronics Show, on expectations that the Pre would prove a good competitor against the iPhone. With the release of Google’s Android OS and several Android-based smartphones, those hopes were quickly dashed. It also didn’t help the company that Apple’s offering, the iPhone, continued to gain more of the increasing competitive smartphone market share. With eleven straight quarterly losses and no “iPhone Killer” device from Palm in sight, the outlook appears very bleak.
In its glory days, Palm paved the way for many of the current smartphone devices through its introduction of the PalmPilot to business and residential consumers. Beginning in 1992, the company is credited with pioneering the handheld organizer market. Eventually, the basic organizational functionality provided by the PalmPilot and other models was combined into internet-connected, smartphone offerings, such as the BlackBerry. Unfortunately, Palm was unable to maintain its momentum and quickly fell behind in the smartphone market.
Currently, Palm still offers several WebOS-based devices, via wireless carriers Sprint Nextel Corp. and Verizon Wireless.
Source: Palm Said to Tap Goldman, Quattrone to Find Buyers
