Palm Treo: The reviews are upbeat; Can a device turn Palm around?

Palm may have a hit on its hands with the Treo Pro judging from the recent spate of reviews as NDAs ended on Wednesday. The larger question is whether this pricey device can give the company a boost in the bottom line.

Palm may have a hit on its hands with the Treo Pro judging from the recent spate of reviews as NDAs ended on

Wednesday. The larger question is whether this pricey device can give the company a boost in the bottom line.

To wit:

Matthew Miller writes in his review and accompanying gallery (right):

The Palm Treo Pro is targeted to the enterprise with its black finish and white key highlights. I was hoping the device would have that great soft-touch rubberized matte casing since I find that helps me grip the device and looks more like a business device. The Treo Pro has a glossy black covering and is a major fingerprint magnet with the back looking much like the black iPhone 3G. The device is thinner than all other Treo devices which is a great move by Palm since I think most Treo devices are too thick and chunky. The Treo Pro has a Centro rounded look to it with a similar QWERTY keyboard.... I am considering the Treo Pro since I do enjoy using Windows Mobile devices and the great thing about the Treo Pro is that you can use it like a non-touch screen device yet get all the power and functionality of a touch screen device when you need it. The excellent GPS signal acquisition, long battery life, Palm touches like the ringer and WiFi buttons, and standard 3.5mm headset jack are compelling to me.

Gizmodo's take:

In terms of design, performance and non-OS features, this is the best hardware Palm has ever made. Though my personal dislike of WinMo has me wishing it ran the PalmOS, the truth is that this is a phone for the corporate crowd, and WinMo 6.1 can do things and reach audiences the PalmOS never could. That it is aimed towards a business crowd also justifies the $550 unlocked price tag. People in the corporate world travel to other countries, and need to switch SIM cards quickly and effortlessly. The feature that deserves the most mention is the redesign—because it's beautiful.

And CNET's assessment:

The good: The Palm Treo Pro boasts a sleek design and offers a wide range of wireless options, including Wi-Fi, HSDPA, Bluetooth, and GPS. The Windows Mobile smartphone also provides many productivity and communication tools for the business user.

The bad: The Treo Pro is too expensive and can be sluggish at times. The QWERTY keyboard is cramped and doesn't really suit the business feel of the device.

The bottom line: The Palm Treo Pro offers significant improvements in the design and features department, but the smartphone doesn't offer anything revolutionary and costs more than its competitors, which will make it a hard sell.

The big question: Can a $549 unlocked device that isn't bundled with a carrier really turn a company around?

Here's the ledger when it comes to Palm:

Positives:

  • Palm has its design chops back--the Centro and now Treo Pro have established a look for Palm to roll out to other devices.
  • Palm's average selling prices will increase in the quarter since it was way too reliant on the $99 Centro for growth.
  • The Treo Pro is benefiting from low expectations. If Palm can consistently over deliver on promises it will be a more viable turnaround story.

Negatives:

  • The Treo Pro is expensive and now may not be time to play that card.
  • The Treo Pro is yet another Windows Mobile device.
  • Palm needs a revolution not an evolution with its devices to restore its lost mojo.

In other words, it's a jump ball when it comes to Palm prognostications. Analysts, however, are skewing to the upbeat side.

Pacific Crest analyst James Faucette said in a research note last week that the Treo 800w is topping Sprint and Palm's initial expectations. Meanwhile, the Treo Pro will launch in Europe with Vodafone, Telstra and other carriers. In the U.S. AT&T is the favorite to pick up the Treo Pro. Faucette is predicting shipments of 40,000 more Treo units in the fiscal second quarter due to the Treo Pro launch.

Faucette also noted that management has been adding the right people--it recently hired Jeff Devine, formerly Nokia's operations VP, to run Palm's operations, which have been a sore spot in recent quarters. Toss in Palm's new OS, code-named Nova, in the first half and the company could be on the turnaround path.

JP Morgan analyst Paul Coster reckons that the Treo Pro could bring Palm closer to a second half profit as average selling prices increase.

Morgan Keegan analyst Tavis McCourt wasn't as cheery about Palm's November quarter. Although McCourt was impressed that Palm could get a device launched quickly the lack of AT&T as a partner is worrisome and could hamper the current quarter. McCourt notes:

It is unclear to us why Palm announced that the Treo Pro would only be available as an unlocked version in the U.S. this autumn. We assume this means AT&T has either refused to carry the product or wants to sell its existing inventory of Treo 750s before committing to a launch date. It is also possible that the two sides may be still debating about price, or that Palm may be waiting to see where the price point of the Bold before committing to a price at AT&T. Ultimately, we still presume that AT&T will end up carrying the Treo Pro given its impressive specs relative to its current portfolio of WM devices, and AT&T's apparent willingness to carry just about any smartphone offered to satisfy its focus on offering the subscribers the broadest selection of handsets.

Nevertheless, McCourt argues that the Treo Pro will at least hold its own in the race to grab enterprise customers. That fact puts Palm on much better footing than it had 90 days ago (click to enlarge chart via McCourt).

treopro.png

Palm is expected to post a loss of 12 cents a share on revenue of $368.8 million for the second quarter.

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