Palm, a Silicon Valley soap opera

Palm, a Silicon Valley soap opera

Summary: HP just bought struggling smartphone maker Palm, Inc. for a whopping $1.2 billion dollars. What's it all mean? To answer that, it's best to understand the strange, winding, wacky story that is Palm.

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HP just bought struggling smartphone maker Palm, Inc. for a whopping $1.2 billion dollars. What's it all mean? To answer that, it's best to understand the strange, winding, wacky story that is Palm.

Before I get started, let me share with you my bona fides. I was Editor-in-Chief of PalmPower Magazine, the largest independent publication devoted to Palm products, from 1998 through 2002. I also headed up PalmPower's Enterprise Edition, which was a publication funded by Palm to explore the enterprise uses of Palm handhelds.

I spent a lot of my time following Palm, excited by Palm, and then dismayed by Palm and its very strange moves.

Next: A company in search of an identity »

A company in search of an identity

For a company with such a clear and compelling concept (i.e., we make computers that'll fit in the palm of your hand), Palm has always struggled with who it was as a company and who its customers were.

It was originally founded by Jeff Hawkins, who chose the original size of the Pilot because it would fit in a shirt pocket. Remember, this was before even cell phones were that small.

Even the Pilot name didn't survive the drama. Pilot Pen Corporation, the company that makes pens, decided that the handheld Pilot computer was infringing on their trademark. Palm had built substantial branding for their Pilot 1000 and Pilot 5000 models, and by 1997 was forced to change the name to PalmPilot and by 1998, to Palm.

Jeff's Palm Computing got bought by U.S. Robotics. It then got bought by 3Com, so you had a company where half of the business was focused on consumer electronics and half was an old-school networking company. Management didn't always understand what consumers wanted.

In 1998, Palm's founders had enough and left the company. But in one of the most bizarre acts of corporate spin-offs ever, the founders started Handspring, which effectively cloned the Palm handheld. So now you had Palm and you had Handspring, run by the founders of Palm.

In 2000, 3Com spun Palm Computing out as an independent subsidiary, creating Palm, Inc. The company IPO'd with shares at $95, but within a year, the share value had plummeted to about six bucks.

Next: Handspring »

Handspring went on to create the first Palm OS phones, and the Treo brand. But by 2003, Palm itself was moribund and to revitalize the company, they brought Jeff and Donna back, merging Handspring back into Palm. In a fit of complete weirdness, Palm then spun out the Palm OS operating system as a separate company, called PalmSource and renamed the merged Palm and Handspring as palmOne.

Are you keeping up here? So now, we had PalmSource, which owned the Palm OS operating system and palmOne (with a lower-case 'p') which was the combined hardware operations of Handspring and Palm. Oh, and in case it wasn't weird enough, Palm bought Jean-Louis Gassée's BeOS (which had some strong multimedia components) for $11 million in 2001. Palm never did anything with the acquisition.

It gets weirder. Apparently, when the old Palm spun out PalmSource, they gave PalmSource the right to the Palm trademark. So, for palmOne to use the name Palm (which they had, originally), palmOne had to pay PalmSource $30 million. Seriously.

In 2005, a Japanese company, ACCESS, decided to buy PalmSource, effectively leaving Palm, Inc. without its operating system -- the operating system it designed and developed. That's ok, because Palm wrote ACCESS a check for $44 million for the rights to the Palm OS source code, the build called "garnet".

Even though Palm had a huge audience for its Palm OS handhelds, the Palm OS itself was getting a little long in the tooth. Palm decided to license Windows Mobile and introduced its first Windows Mobile handset, the Treo 700w, further muddying the waters that was the Palm brand, especially since Palm had long positioned itself as better than Pocket PC and Windows Mobile.

Then there was the Foleo, the "what the frak were they thinking?" over-priced, almost-a-netbook idea that was announced in 2007, but cancelled before it was released.

Next: Pre thoughts and caviar dreams »

Pre thoughts and caviar dreams

That all brings us pretty much up to date except for, oh, the screwing of its developers. Palm had a wildly loyal developer base, with thousands of high-quality Palm OS applications and hundreds of companies making a good living innovating on the Palm OS platform.

So what does Palm do? Cut them off. After all, anyone who actually wanted to do business with Palm clearly wasn't good enough for Palm.

When the Palm Pre came out, almost no Palm OS developers were given the opportunity to develop for the new WebOS. And not only were their best developers not courted, when TealPoint created a skin for old-school Palms that made the launcher look a little like the Pre, Palm sued them, forcing the product off the market.

TealPoint, for the record, was one of the most prolific developers of extremely high-quality Palm OS products. Other Palm developers didn't get sued, but they didn't get courted either. Palm, according to most then-Palm developers, didn't want anything to do with "that old thing". Palm wanted to start fresh -- and that meant a newer, better class of developers.

Palm has always had a strange desire to be Apple and to provide premium, BMW-class products -- rather than simple Fords or Chevys. That could be because a few of their CEOs either came from Apple or made Apple add-on products, but no matter what, there's always been this strange aspiratonal identity crisis. The company made great products for the "everyman" consumer, but tried to constantly position the products as if they were for the luxury elite.

Next: HP acquisition »

HP acquisition

All of this brings us back to the HP acquisition of Palm for a truly insane $1.2 billion dollars. In my opinion, HP paid $1,195,000,000 too much.

Let's look at Palm's assets. First, there's the loyal audience of millions who have been using Palm OS devices for years. What? Oh, they're gone because Palm discontinued the Palm Desktop and said, "see ya, wouldn't want to be ya."

OK, nevermind.

Next, there's the loyal developer community, who's been building exceptional Palm OS applications for years. What? Oh, they're gone because Palm did everything they could to get the stink of those old developers off the bottom of their corporate shoes.

OK, nevermind.

There's the company's webOS, because there's no other well-integrated operating system for mobile devices and phones. What? Oh, there's Android, the iPhone OS, and even the new Windows 7 mobile operating system, plus, of course, Symbian and BlackBerry. WebOS is nice, but is it worth $1.2 billion?

OK, nevermind. Maybe, maybe webOS is worth $5 million. Maybe.

And then there's Palm's relationship with carriers. Well, there's something to be said for that, but HP already has carrier relationships for its iPAQ phones -- and while some iPAQs are now getting a little out-of-date, they're still strong contenders.

What else might HP get? The management team? Seriously? Have you seen how Palm's management team managed Palm? What about the webOS engineers? Well, if HP had waited a few months, Palm would have imploded, and those engineers could have been picked up for a mere recruiting fee.

Is there any upside at all?

Look, webOS is a fine, little OS. It'd be cool to see an iPad-like device running webOS. And it'd be nice to see more phones, from a more reliable company, sporting webOS as an alternative.

But there's nothing compelling here, nothing that gives HP an advantage they couldn't have otherwise gotten from, say, Android. And it's going to take a whole lot of sales to make up for the $1.2 billion boondoggle that is HP's purchase of Palm.

It's sad, really.

The PalmPower archives are still up. If you want a tour through Palm's strange past as it happened, read HP buys Palm, a Palm retrospective.

Read also: Did HP save Palm with acquisition? Or did it save itself? News to know: HP-Palm; Microsoft-HTC; Gizmodo iPhone; earnings webOS 1.4.1.1 update may have fixed two major Pre Plus problems Palm-HP: Microsoft bites bigtime HP forks out $1.2 billion for struggling Palm - Money well spent? Will HP/Palm be the enterprise challenger to RIM? HP Slate with webOS: The potential iPad rival from HP's acquisition of Palm

Topics: Operating Systems, Hardware, Mobile OS, Mobility, Software, Wi-Fi

About

David Gewirtz, Distinguished Lecturer at CBS Interactive, is an author, U.S. policy advisor, and computer scientist. He is featured in the History Channel special The President's Book of Secrets and is a member of the National Press Club.

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14 comments
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  • Palm sure lost me as a loyal customer

    I've been using Palm OS for years, but... when my workplace migrates to Win7 next month, and I (probably) find that Palm Desktop won't work with Win7 so that I can't sync with my TX any more...

    Well, I don't need a smart phone (and the sky-high monthly charges for using the thing), so I'm probably going to go to the iPod Touch. Because it will do what I need it to do, for less than it costs me to buy a Palm TX. (If I can find one.)

    Just score me as one more lost Palm customer.
    IT kibitzer
    • TX user also

      I started with Handspring and then migrated to a Palm TX later. Love the device and still use it. Being loyal to Palm, I resisted the iPhone until recently. Now that I own and use an iPhone, I have to begrudgingly give Apple their due. The Pre came out a little too late and now I'm an ex-Palm guy. I would still like to see the merger succeed and give Apple some competition but I don't think it likely.
      bobby_d4004
    • I have a TX as well

      Now it functions solely as an alarm clock for me
      as it has pretty much gotten too obsolete for
      anything else.

      I will *not* be buying into Apple's walled garden
      and non-replaceable batteries anymore either,
      though.
      sullivanjc
  • RE: Palm, a Silicon Valley soap opera

    I'm still using my Sony Clie. It's a great little PDA and a book reader.
    abarten
  • Another Palm/Handspring user

    I had Palm IIIx, Handspring Platinum, TX - loved them! I mean really loved them. IT 15+years and Tech for 26, and was really pleased with the interface, instant on, design, hand writing recognition. They had everything else beat "palms down". My TX was damaged recently, and I too am looking for a replacement. It sure isn't going to be something that costs me $$$ a month. I don't know when corporate is going to learn that greed and stupidity have cost civilization way too much already.
    webgov
    • RE: Palm, a Silicon Valley soap opera

      @webgov You can get your Palm T|X fixed inexpensively (including getting an internal microphone for recording memos) by Chris Short, ebay@palmdr.com
      President
      Short Tronics, INC.(Formerly PalmDr)
      Phone: 612/326-4364 but email is preferred
      alexandracrisafulli
  • RE: Palm, a Silicon Valley soap opera

    First a disclaimer: we got our Pre phones the week they were released and we've never looked back. My wife wondered why it didn't capture video, and I told her to keep watching. Sure enough, the 5th or 6th upgrade included just that. That said, I'll be the first to admit that Palm stinks when it comes to marketing.

    Years ago, I bought my wife a Handspring Visor with the cash I made from buying up and selling high-tech books dumped into a bin at a Grocery Outlet, of all things, during the dot-com bust! I eventually inherited it and still use it for project tracking and billing thanks to some custom programming (Excel / Access).

    HP is as good at marketing and customer support as Palm is bad. They now own, as you point out, the rights to both the BeOS and WebOS and if any company has the mojo to figure out how to use and market both those, they do. Lest you think I jest about BeOS, that thing was easily 20 years ahead of its time, built as it was for serious symmetric multiprocessing, something that still vexes many sharp people.

    Your experience with Palm has soured you and that's understandable. But keep watching...
    Norm Cimon
    • Problem is, I don't WANT a Pre...

      ... I want a PDA. I don't need the darned $$$ phone service. The ONLY decent non-phone PDA on the market right now is the Ipod Touch.

      I would be <strong>ecstatic</strong> if anybody could point me at an alternative.
      IT kibitzer
  • RE: Palm, a Silicon Valley soap opera

    I've been a die-hard Palm OS 5 loyalist (I still cling to
    my Treo 680) and this article really resonated with my
    frustrations. You've done an excellent job of summing up
    the soap opera that has been Palm.

    My only hope is that HP might finally bring some stability
    and identity to this thing called Palm. Somehow, someway.

    My personal blog articles have discussed Palm with terms
    you used that make it appear the idiocy is not just in our
    individual heads, it's really out there (the identity
    crisis, the debacle with TealOS...)

    With all your experience and perspective, coming to the
    conclusion that $1.2 billion ain't worth it for HP, I'm
    afraid you're going to be right although I am hoping and
    can make the argument that it can work.

    In terms of identity, perhaps bringing webOS into the HP
    family, with its global brand strength and a bigger
    picture strategy giving Palm context and meaning, might
    provide the stability, focus and cash Palm needs to
    develop and stay on relevant.

    In terms of ROI, HP is seeing the growth of the space, and
    buying a viable OS (rather than working with Google's
    Android) might give them a competitive standpoint for a
    market that is still growing. If HP is not ready to
    concede, acquiring the webOS platform - which can be
    developed to become a truly heavy-weight mobile OS - makes
    sense. I mean, at least we know HP is not going away
    anytime soon, and if they're determined to be a player,
    hopefully a Palm OS will be a part of it.

    http://nontechietalk.blogspot.com


    We shall see what we shall see.
    Non-techie Talk
  • Still have a Handspring

    I still have my 15 year old Handspring in a SmartPad II. Works great for taking notes or jotting quick ideas and drawings. Just write on the pad on the right and it's transcribed to my handspring as a bitmap. I used it all through school for taking notes in class. Unfortuantly, there are no Win7 drivers available. I have an old linux box that still supports it. Maybe Linux in a virtual maching on the Win 7 platform. Hmmm?
    Scubajrr
  • Palm VII

    I have an aging Palm VII that I still use. More importantly, Palm Desktop, version 4.1.4 is on my laptop and still my primary calendar, address book, personal note and reference tool.

    I need to upgrade, but where is the hardware? How can I keep using the good software? If I do have to transition, how do I port my data?

    I have a Motorola Q smartphone, but that is no substitute. The display is too small. I hate Outlook. Besides, I like Grafitti. The Palm VII display is the perfect size.

    The iPAQ sucks, although it ran close behind Palm and Handspring. That is why I was a Palm, not Compaq customer.

    Palm's weird history of mismanagement is one of my greatest frustrations as a consumer.
    scwlaw
  • Did HP get the classic PalmOS in the deal?

    Would there be any advantage to updating the classic
    PalmOS to run the HP Slate, or is WebOS the only viable
    option? Is there a way to create a hybrid of the two?

    I'm one of those fanatical PalmOS fans who still uses his
    m100 and Palm IIIxe...
    roystonlodge
  • RE: Palm, a Silicon Valley soap opera

    If you're a really old person who still loves Palm OS, and especially the T|X, you can get your device completely overhauled including new battery, new ROM chip, new on/off button, new glass digitizer, internal microphone for recording memos, etc., etc. from
    Chris Short, President, ebay@palmdr.com
    Short Tronics, INC.(Formerly PalmDr)

    The service is inexpensive, reliable, and fast!
    alexandracrisafulli
  • RE: Palm, a Silicon Valley soap opera

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