Analyst Opinion – Palm and Apple remind me a lot of Netscape and Microsoft. Netscape came out early and promised to put Microsoft out of business. When Netscape did not execute, Microsoft took Netscape’s market. Palm seemed to do the same thing with Apple, effectively calling them out early and promising to effectively take the market away from them. While the Palm Pre is a great phone, the word “premature” came to mind along with my memory of the Netscape disaster. However, these companies clearly hate each other and Palm is largely run by a large number of disgruntled ex-Apple executives now.
This makes for the kind of situation where you get a legendary battle But I am wondering if Palm is up to the fight as they most recently appear all bark and no bite. Let’s speculate about what Apple is bringing to the table and weather Palm can survive this fight they started. Cime in at the end of the article with your thoughts.
Apple’s phone line
One of the things that has set Apple aside from other cell phone vendors is that they basically have one phone in two configurations. Most other serious phone vendors have lines of phones. Apple certainly gets the importance of having a line and has the most complete line of MP3 players currently in the market. At Interop, a Networking and Telephony show held in Las Vegas part of the speculation was on Apple’s new tablet device, which was thought to be a large iPod Touch where cell phone capability would be an optional accessory. That last seems to be a stretch for me, but it adds a touch of mystery to something that will either launch toward the end of summer or next year, depending on the source.
However, last week the discussion of the new standard iPhones came up and I understand there were two under review a few months ago. One as a clean update on the existing design and the other had a keyboard implementation similar to the Palm Pre. While the belief seemed to be that Apple would do one/or the other, I couldn’t see why they wouldn’t do both and given how focused Apple is on putting Palm out of business having a more mature version of a phone that looked just like the Palm Pre would seem an obvious place to attack.
Even more interesting than this is that Jim Handy, an analyst who specializes in chips, told me Apple has cornered the market on a type of memory that could either show up as something that would speed up a laptop or a new Nano sized low cost iPhone. They have 100 million of these chips on order (you would typically use two in a device) and I’ve never seen them that interested in something like Microsoft’s ReadyBoost technology, which would be the laptop play. The only other place it might make sense is in a large Shuffle or low capacity Nano iPhone. I see little point in a large Shuffle. We know they have been working a lower cost device that could probably move an impressive number of devices. Whatever this is, it will show up soon, because they have already bought the memory and won’t want to keep it in inventory.
Finally, and this is for sure, the Apple application store has become a huge competitive advantage with users raving about the applications they love and becoming roving sales reps for the product. Apple, and iPhone users, look to be ready to pound on Palm, can Palm hold up?
Is there a future for Palm?
Word on the street is that Palm has had some kind of manufacturing problem and will only have a very small number of phones in each store at launch. This means that any feeding frenzy they build will fall over onto the Apple products that will launch shortly after their launch. Their application store isn’t ready and they recently seemed to be going out of their way to drive developers away from their platform. They still only have one phone and limited accessories though they still have the shrinking Palm Treo installed base to work with.
Palm is initially exclusive with Sprint, the only cellular vendor that seems to have a worse reputation than AT&T has in this market (Verizon is best and neither Apple nor Palm have them yet) though this exclusive is only for six months. Palm is expected to announce first and the typical strategy would be to seed heavily and use marketing to freeze the market until they can get enough products into stores. But Palm isn’t doing this, they apparently aren’t going to promote the product at launch heavily and they don’t have sufficient seeding units. The mental image of a hot Apple knife through Palm butter comes to mind.
If Steve Jobs shows up next month to launch the products, which fortunately for Palm is unlikely. Regardless, Apple appears to be in far better shape than Palm is at this moment and there is a very real possibility that Apple may leave Palm bleeding and on the edge of survival.
If what I’m hearing is accurate, Apple is coming into June with every intention of making sure that Palm is dog food by the end of the summer. Palm seems to be nearly completely unaware of this and their PR and marketing resources aren’t even trying to step up. I can recall around a decade ago a young Netscape bragging they would put Microsoft out of business. You need to be really careful of who you pick fights with. Apple seems to be ready to show Palm that this apple bites back. On the other hand, and as I finish this, I’m hearing that Apple may have to delay their launch, giving Palm a chance to get its act together. Markets turn on little things like this and the next few weeks look to be really interesting. We’ll know if Palm fired too soon or whether Apple can execute without Steve Jobs and, by the end of the summer, one or the other will be left bleeding from this battle.
Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies.
The opinions expressed in this commentary are solely those of the writer.