Palm: A Love Story

The general feeling, from what I can gather through multiple conversations with long standing Palm loyalist customers, seems to be that Palm is dying and that everyone who bought into Palm’s vision is mourning the loss. Given that, while I have been hurt by Palm’s decisions more than most, I’m not ready to say that Palm is dead. In fact the company may have a renaissance, a la its big brother Apple, in it yet. So I thought I would shed some light on the Palm story from someone who has been too involved over the years.

Palm Computing was founded to write software for other company’s mobile devices and found that those devices were horrible. Palm said, “Hey! We can do better!” and wrote their own operating system and designed their own devices. But the company struggled to get funding because so many mobile computing companies failed in front of them. US Robotics, a major manufacturer of modems at the time, liked what Palm was doing and bought a majority stake. At the height of the dot-com hysteria, 3Com bought US Robotics. 3Com was run (into the ground) by Eric Benhamou, its CEO, who also took a seat on Palm’s board.

In 1999, with Palm riding high, the management team pushed Eric to take it public. He refused and in so doing, forced Palm’s management team and a number of followers out the door. Donna Dubinski, Jeff Hawkins and Ed Colligan formed Handspring and licensed the Palm OS. This is the first time Palm was split in half.

Over the next couple of years, Palm continued to churn out interesting devices mainly because those devices were already in process when Donna, Jeff and Ed left, as I understand it. Palm was also pushed by Handspring (the first to introduce expansion cards) and Sony (much more stylish devices). Palm released really sleek and small devices like the Palm V series and some of the first wireless devices like the Palm VII. I believe it took about two years for the original team’s designs to work their way through Palm and into the market. After that, the quality of device really fell off.

Of course, the company went public anyway a year or two later anyway, making the force out of the original team stupid.

By my recollection, though, Palm had already lost its way by the beginning of 2002, at the point where the original team’s devices had already been in the market. Jeff was always quick to point out that the device is not a desktop replacement and therefore didn’t need to compete with Microsoft’s operating system offerings. The feeling at Palm pre-split was that it was more important how people accessed data and information, for instance, than it was for there to be high-res color screens and the like. There was also a sense that competing against Microsoft head-to-head, processor power to processor power, was a huge mistake. The original team was right, it was, and the follow-on team did it anyway.

By 2003, Handspring had run its course and they realized they needed bigger legs to move into the cellular business with its Treo line and the two companies merged back together. By then, however, the Board led by Eric Benhamou split the company a second time, this time spinning out the operating system group.

By 2005, Palm saw that the future was cell phones, not stand-alone handhelds, and pretty much laid off anyone specifically involved with the old line that couldn’t transition to the new. That’s where we got caught. Palm’s education team, which was focused on selling traditional handhelds to schools, was let go and Infinity Softworks’ play for high school mathematics was over.

Since then, Palm has made a living selling the Handspring-designed Treo line of products and transitioning as many of its existing handheld customers as possible. Eric Benhamou left the Board sometime in here also. Palm also bought back the operating system group in 2006, finally giving Palm the ability to innovate around both software and hardware, which in the cellular business has always been very closely tied together.

The popular wisdom is that Palm is dead. I don’t agree for three reasons:

1. The old team of developers led by Jeff, Donna and Ed are resurfacing at Palm and are very excited, although tight lipped, about what is going on. This is good news for the company.

2. The mobile market is in a state of transition, which opens the doors for “new” players. Palm is only one really cool device away from being back near the top of the market and being mentioned along with Apple for innovation. And as much as everyone is upset with the company, I sense that some really nice devices would bring a lot of people back into their camp.

3. It took two years for the original team’s devices to work their way through the company and for Palm to be “influenced” by new blood. This executive team has been back in charge and in control of the operating system for only one year so far. I would expect to see the second wave devices give way to a third wave at the end of next year, with this third wave influenced tremendously by the original team plus some new blood that came from Apple’s iPod group.

Will Palm die and be remembered as by-gone from another era outpaced by Apple and the like? Or will they follow Apple’s lead — where many of the original Palm employees came from — and resurrect itself? I don’t know and no longer get insider information. But I’m starting to sense some positive momentum for the beleaguered company.