Worth the Wait

During last week’s fourth quarter earnings conference call Palm told us that company was doing well.  What many people heard was that Palm’s next generation Linux operating system, “Palm OS II”, will not appear on a new device until sometime during the 2008 calendar year.

No big deal

If you listened to what Palm President &CEO Ed Colligan said during the conference call, Palm is a healthy company.  They are working to complete the recapitalization deal with Elevation Partners by September.  They are preparing to release the new Foleo Mobile Companion, and they intend to release new Windows Mobile and Palm OS based products before the end of the year. Specifically I believe that Palm is alluding to the rumored Treo 800w, 770, and “Gandolf” devices. In the next six month, I expect Palm to deliver new Windows Mobile and Palm OS solutions that add differentiation to the Treo product lines and at multiple price points.

Palm is seeing a 43% increase year-over-year of Treo sell through sales to end user customers.  Generally speaking, the sales of Palm OS Treo and Windows Mobile Treo devices are about 50%.  And there is a strong demand for Windows Mobile devices from enterprise customers while consumers and small businesses continue to favor Palm OS devices.

I believe that these numbers speak to what the typical Palm customer is looking for: solid smartphones that deliver the solutions that help them get things done in their personal and business lives.  The selection of a device is a personal choice.  It has more to do with the suite of applications available for that device and the customer’s personal needs than the operating system.   In the word of Ed Colligan, “We’re not waiting for next generation platform development to deliver some great new products.”

Business realities impact development

The revelation that Palm won’t be releasing a “Palm OS II” device until the 2008 calendar year is a bit of a let down.  There is a vocal community of customers who are hungry for more powerful devices.  These customers are looking for devices that offer multitasking; devices that have newer faster radio technologies; devices that allow simultaneous voice and data transmissions.

The key to all of these features is a new version of the Palm OS.  The original rumors that Palm was looking at alternative operating systems surfaced in the fall of 2004, around the time the Tungsten T5 was released.  Palm is about to release the Foleo, which does have a Linux operating system.  The Foleo OS is not “Palm OS II”.  Palm may have been dabbling with Linux operating systems for the last few years, however it now seems that there are some other realities that are now being called into play.

First was Palm’s perpetual licensing of the Palm OS Garnet 5 operating system source code from ACCESS.  This deal allows Palm to use the operating system they wrote in any way they want in any product they want in whole or in part.  The source code for Palm OS 5 will play a significant role in Palm OS II.  The second influence on the new OS is the addition of Elevation Partners to Palm’s management team and the acquisition of iVentor.  The resources of both companies will allow Palm to develop solutions that will be easier to configure and use.  (I also expect devices that are more consumer friendly.)  The last major influence on Palm’s development plans is the launch of Apple’s iPhone.  For better or worse, Apple’s hot new smartphone is going to make all cell phone vendors to go back and rethink their hardware and software designs and Palm will be included in that group.

In conclusion

In the last nine months, Palm’s business has been impacted by a number of internal and external forces.  Some of those changes are a direct result of Palm’s actions; others are changes to the cell phone market.  The addition of Elevation Partners to Palm’s board should bring the expertise and managerial oversight that Palm will need to successfully bring new differentiation products to market and deliver a solid Linux OS foundation on which to build next generation applications on top of.

Let us know what you think in the 1SRC forums.