How HP Can Save Palm

Wednesday Aug 31st 2011 by Mike Elgan
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HP could challenge Apple and Google in the all-important mobile sector if it took a series of key steps.

The whales will have to wait. Right now, it's more urgent to save Palm.

The people behind Palm devices and software have repeatedly created incredibly good products, while the leaders of the many companies involved have done everything possible to destroy the brand and kill its momentum in the market.

As Apple has proved, a successful mobile platform needs long-term thinking, clear vision and a cohesive strategy.

Observers of the mobile scene, including Yours Truly, thought HP might -- finally! -- bring these qualities to the long-abused Palm line.

And they can still do it. I'll tell you how in a minute. First, allow me to recount the many ways the platform has been challenged by rudderless “leadership,” and also tell you why Palm needs to be saved.

Palm’s Tragic Past

From the beginning, Palm (a.k.a. Palm Computing, U.S. Robotics, Handspring, PalmSource, palmOne and HPwebOS, although it will always be Palm to me) has been bedeviled by fickleness and a lack of executive vision.

Jeff Hawkins invented the Palm Pilot in the early 1990s. In doing so, he created the first successful PDA, which would form the basis for the smartphone and the entire mobile industry.

Impossible to imagine now, back then most people used ring-binder type paper organizers. A minority used Sharp Wizard type electronic organizers, which didn't sync with PCs well, and generally had clunky, super-closed software platforms.

The Palm Pilot replaced both those models of personal organization.

Hawkins invented the elements of mobile success familiar to anyone who loves iOS or Android devices: simplicity, usability, connectivity and apps.

But it didn't take long for Palm Pilot user enthusiasm to be squandered by a sudden, jarring and needless change in direction -- a pattern that would repeat itself again and again:

1995: Palm is acquired by U.S. Robotics.

1997: U.S. Robotics is acquired by 3Com.

1998: Hawkins and his team of founders leave 3Com and launch Handspring.

2000: 3Com spins off Palm as an independent company called Palm Inc.

2002: The Palm software platform is spun off as an independent company called PalmSource.

2003: Palm Inc. merges with Handspring, and the new company is named palmOne.

2005: palmOne buys PalmSource's partial ownership in the "Palm" trademark, and calls itself "Palm" again.

2005: A Japanese company called ACCESS buys PalmSource, and renames the software platform “Palm OS Garnet."

2006: Palm releases a Windows-Mobile device.

2006: Palm pays $44 million to ACCESS for source-code rights to Palm OS Garnet.

2009: Palm announces that it will abandon Palm OS Garnet and create a new operating system from scratch called webOS.

2010: HP acquires Palm for $1.2 billion.

2011: HP discontinues "Palm" brand, announces new line of webOS devices, including phones and a tablet designed to compete with the Apple iPad.

2011: HP launches new webOS devices.

2011: HP announces that it will stop making webOS devices.

2011: HP drops price of its tablet to $99 to get rid of otherwise un-sellable inventory.

2011: The tablet sells so well, HP announces that it will build more tablets in "one last run."

With all these about faces, spin-offs, mergers and acquisitions, the question isn’t “Why didn’t the Palm succeed?” The question is: “How did it survive this long?”

In fact, the ability of the various Palm incarnations to gain loyal followings in spite of all these changes tells us that the Palm has enormous potential, and should not be scuttled.

It’s not too late.

Why HP should Save Palm

If you follow current trends, the entire mobile industry will soon be owned by Apple and Google. Mobile revenue is already dominated by Apple. And future market share is likely to be dominated by Google.

RIM is in trouble. Nokia is on the ropes. Motorola will become part of the Google juggernaut. Microsoft can’t seem to get anyone interested in its Windows Mobile platform.

The world needs a third player. Palm is the best candidate, because webOS is the second best multi-touch operating system available to everyday consumers.

HP needs a viable strategy for third-generation computing. Even though HP has decided to spin off its consumer PC business, it still plans to offer systems that have user interfaces.

Today’s WIMP (windows, icons, menus and pointing-devices) user interface will soon go the way of the dinosaur, and HP will go with it unless the company realizes that it already owns the second-best third-generation UI available.

In the 1970s, Apple co-founder Steve Wozniak invented the personal computer. But because he was an HP employee, he was forced by his contract to let HP own and develop anything he invented.

So Woz took his PC prototype to the suits at HP, and said, essentially: “You own this. Do you want to turn it into a product?” HP’s response will live in infamy. They unceremoniously told Woz that nobody would ever want to own a computer, and that they had zero interest.

So Woz and Steve Jobs founded Apple, which is now the most valuable company in the history of computing.

HP is now repeating this history. They have in their possession the future of computing. Again. And they’re basically saying: “Nobody wants this.” Again.

How HP can Save Palm

There are two successful mainstream platform models today. The first is the Apple model, where one company sells integrated hardware-software devices. Apple doesn’t license iOS or Mac OS X to third parties. The only way to get an Apple operating system is to buy Apple hardware.

The second model is the Google model. One company makes the operating system, which is licensed to other companies that make hardware.

The best model for HP is the Apple model. For starters, Apple is making two-thirds of all revenue in the industry because it has the best model, and no other company is challenging Apple in this model. As a result, the company is running away with most of the money.

HP is not an advertising company like Google, so the Apple model makes far more sense.

However, the Apple model requires freedom from bureaucratic, group-think decision making, as well as short-term profit taking.

Here are the steps I believe HP could take that would not only save Palm, but HP:

• Put all the Palm-related technologies into a separate division, located physically away from other HP divisions, to be run like a startup. They should do with Palm what IBM did to create the IBM PC.

• Find an amazing visionary, and make him or her dictator of the new division, protected from the HP bureaucracy.

• Don’t license webOS to anybody.

• Copy the Apple model for software distribution, and make everybody come to HP’s app store for software. But don’t copy their revenue model. Undercut them by taking only 10 or fifteen percent of app revenues.

• Promise or guarantee to users and developers that HP will continue to invest in Palm for a minimum of 10 years, no matter how poorly it does in the market.

• Continue to develop and evolve the fullest possible line of webOS products, including tiny phones, regular-size phones, tablets and desktop systems.

• Don’t try to compete with Apple in the consumer space. Make webOS the iOS for the business world. Focus on business tools, enterprise integration and vertical solutions.

Palm is on the ropes. This great technology has suffered through 16 years of neglect, abuse and indecision.

As Apple has proved, a successful mobile platform needs long-term thinking, clear vision and a cohesive strategy.

And that’s really all Palm has ever lacked. If HP can provide this, Palm can be saved. And so can HP.

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