PalmOne, We Hardly Knew Ye

Posted on February 7, 2005

Anyone want to start up a pool on how long it will be until PalmOne goes out of business?

That’s not something I take pleasure in writing. I’ve been a fan of their products since back when they were a division of 3Com (anyone remember those days?). But their current management seems bound and determined to run the company into the ground. Anyone who looks at TiVo or Google and says “they’re bound to be successful, their name is synonymous with their product category” should take a long hard look at how PalmOne managed to screw things up.

Once upon a time, “PalmPilot” was synonymous with “PDA”. This was back in the late 1990s, when the company’s products were omnipresent in business.

But as phones got smarter, Palm missed the curve, milking their Palm III and V cash cows for years while their original founders left to found Handspring — where they created innovative devices with pretty low build quality. Eventually they sussed out the phone threat and started working on the Treo, which they brought back with them when they returned to PalmOne.

Today the Treo is the only product PalmOne has that shows any promise — its sales are brisk, while PDA sales continue to drop. So how does PalmOne react? By screwing their Treo customers — this time it’s by jacking up the price of the latest model, the GSM-based Treo 650, by $100 just 2 days after launch.

So PalmOne has serious problems relating to customers. But that’s not the only problems it has. Its product line is out of control. Take a look at this screen shot from their Web site:

Look at all those models! And more tellingly, look how they overlap. Who is the customer for each one? If I am a home user with some money to spend, is the Zire 72 for me, or the Tungsten T3? If I am a business user looking for an inexpensive device, will I be losing something important if I skip the Tungsten E for the Zire 21? Why is there no inexpensive and mid-range Treo?

It’s a mess.

Palm needs someone to clean house. Their sales story right now is reminiscent of Apple’s in the early 1990s — a profusion of models, all blurring into one another. Perhaps the smartest thing Steve Jobs did upon taking the helm at Apple was throw out all the product lines and replace them with a simple quadrant of four products:

• Home user, desktop: iMac
• Home user, laptop: iBook
• Business user, desktop: Power Mac
• Business user, laptop: PowerBook

This dramatically simplified Apple’s sales story, and it sold products based on how people use them rather than on spec sheets and features — which is how people prefer to buy. (Not to mention that it probably cut Apple’s manufacturing and distribution costs, too.)

Palm needs a Steve Jobs to do this exercise for them. Considering that PDAs are a shrinking market, do they really need seven different PDA models? And why is there one model (the Tungsten C) whose only distinction is that it comes with built in WiFi? (Adding WiFi to any other Palm device requires shelling out $100 on an add-on card.) Is there anyone out there for whom “must have WiFi” is the #1 priority on their PDA requirements list, overriding all others?

Palm needs to get their hands on the tiller and steer before it’s too late. They’ve already managed to squander a huge lead in market share and public goodwill. Maybe they’ll be able to steady things before they deteriorate further to the point of outright collapse. I hope so.

UPDATE: See the next post, in which I take a stab at fixing PalmOne’s product line.