Palm’s massive iTunes gamble: Are they nuts?

Analyst Opinion – No guts, no glory. And as Palm tries to regain a slice of what made it such a cool company in the 1990s, its latest move is an eyebrow-raiser. The company’s decision to enable Palm Pre devices to sync to users’ iTunes libraries is the most cheeky shot across Apple’s bow since hackers discovered Mac OS X could be installed on the suddenly-popular – and very non-Apple – netbooks. As much as these so-called Hackintosh machines get under Apple’s skin, it’s easy to conclude that Palm’s move must be steaming up the boardroom in Cupertino even more.

I’m still on the fence as to whether Palm’s move is brilliant or brilliantly deluded. Either way, you’ve got to give the company credit for having the courage to tweak Apple’s nose. Palm could have built its own online storefront – just as Apple did after it launched the iPod – but instead decided to take the road more perilously travelled.

Sure, it’s insane, but in many respects, Palm had no choice. They essentially have three core needs:

Build content management credibility. Fast. Creating your own online content delivery storefront is hard work. Apple pioneered the space and has pretty much owned it ever since. Everything the record companies and Microsoft have thrown at it has been a miserable failure. Palmistas figured if they can’t beat ‘em, then join ‘em.

Don’t get washed away by iPhone-mania. Palm is trying to avoid being eclipsed by Apple’s June 8th iPhone announcement. Timing’s never been one of Palm’s strengths, and without a big bang surrounding its June 6th Pre launch, Palm risks getting lost in the third annual Apple announcement extravaganza. Quick answer: A hasty stunt.

Drive longer-term publicity. An ongoing legal battle helps Palm more than it hurts. In a world where any publicity is good publicity – yes, I’m talking to you, Paris Hilton – Apple suing Palm helps keep the Pre front and center long after the initial launch hysteria dies down.

In the end, it’s an easy bet that Apple’s lawyers will jump all over Palm just as they’ve gone after others throughout the company’s history. Few companies rely as heavily on differentiated technologies as Apple does, and since iTunes represents the very center of Apple’s content-driven universe, the company can’t afford to have anyone – much less Palm – attack its turf.

At the same time, there’s something to be said for encouraging competition. As iTunes has become the 800-pound gorilla of the online music and movie business, consumers have increasingly found themselves at Apple’s mercy. Don’t like Apple’s new rate structure? Tough: Where else are you going to go?

In the old days when music came on spinning discs that we actually had to fetch at the mall, I’m guessing most of us would have been rightly ticked if the record companies forced us to shop at only one store and pay only one, centrally-dictated price. For a country that so deeply seems to cherish a competitive free market economy, I’m a little disappointed that American consumers have accepted Apple’s dominance so quietly.

If anything, Palm’s move, crazy as it seems, could reintroduce the word “competition” into a market that clearly needs it.

Carmi Levy is a Canadian technology analyst and journalist covered with scars from his years leading IT help desks and managing software development projects for big bad insurance companies. He comments extensively in a wide range of media, and works closely with clients to help them leverage technology and social media tools and processes to drive their business.