The Evolving Treo
Sales of Personal Digital Assistants (PDAs) are slowing and the total annual sales numbers have been in decline for years now. Is it time for the rest of us to transition to “smart” devices?
The PDA market is in decline. All of the major PDA players, with the exception of Palm, have moved on to other platforms and markets. With no one else competing in the PDA space, Palm has been able to capitalize on the shrinking demand for traditional PDAs. Palm executives have likened the slowdown in their traditional handheld device business to an airplane coming in for a landing after a long flight.
The slowdown in sales can be illustrated by the sales numbers presented at the June 28 Q4FY07 earnings report. During the last quarter, Palm’s sales figures for their handheld PDA business were 298,000 units shipped, which generated $57.1 million dollars. Contrast that with the sell through numbers for Treo smartphones during the same quarter which totaled 750,000 units, generating $344.2 million dollars for Palm. (That is a difference of 452,000 devices totaling $287.1 million dollars.)
Let’s be clear, $57 million dollars isn’t exactly chump change. Especially when Palm’s handheld business is, if we keep with the aeronautics theme, on autopilot. With Palm being the only major player in the PDA market, they are able to capture a high percentage of new PDA purchases. All three of Palm’s PDAs (Z22, Tungsten E2, and the TX) are mature devices that offer valued features at attractive price points. The resources required to keep these devices on the market is less than what Palm is taking in on sales. As long as Palm can turn a profit from PDA sales, I believe that they will continue to sell them.
Enter the Treo 690
Rumors have been circulating on the Internet for a few months now that Palm is preparing a new Treo with a new form factor. These rumors refer to a device known as “Gandolf.” I believe that Gandolf, whose production name is likely the Treo 690, is important to Palm and their customers as I expect it to bring a new low-cost price point for the Treo line up. Think of Gandolf as the Z22 for the Treo line.
Palm’s executive team has talked about providing Treo smartphones at multiple price points, just as they have done with their traditional handheld business. If you look at the current pricing structure for new service activations for the Treo 680, you almost get the impression that it is the low cost Treo. When you purchase a Treo 680 with a new line of service the price drops dramatically with some online retailers, such as Amazon, selling them for $99 or less. Yet, if you want to purchase the Treo 680 without a service plan, the out of pocket cost for the consumer is $399. I would hope that if the Treo 690 is to be Palm’s new low cost platform, it retails for less than $99 with a new cellular service agreement and no more than $199 without one.
When all is said and done, the Treo 690 should be the same price, with a new activation, as the feature flip phones sitting next to it on the retailer’s shelf. Think about it: if the Treo 690 costs the same as the T-9 flip phone sitting next to it, which would you rather text message on?
In conclusion
While we may see the end of Palm’s handheld business in 2008 or 2009, the company has been taking steps to ensure that there is a migration path to affordably priced Treo smartphones. Adding a low cost entry level Treo to the mix will help attract new customers who would otherwise not consider purchasing a Treo because they have simply been too expensive.
There will always be some of us who just prefer the non-phone organizer. For those customers, there will always be a Z22-like device being sold; it just may not be sold by Palm. That said, Palm can’t ignore the opportunity that exists by getting even a small percentage of feature phone customers to replace their feature phones with a full featured smartphone.
What are you thoughts on a low-cost Treo? Let us know in the 1SRC forums.
