Under pressure to assure the market that it can expand its traditional, enterprise customer base, Palm Inc. made a high-profile announcement last week in New York at the DigitalLife 2006 conference that it would launch a Treo 680 model for consumers in the United States.
But-and this is a significant caveat in the rapidly evolving world of inexpensive smart phones-Palm said that a series of launches of the Treo 680 with as-yet-unidentified carrier partners is set for the period between “the coming weeks and months” and the end of Palm’s fiscal year, June 1, 2007. The rollout will begin in the United States, then go global.
Whether that suitably vague launch window will be met and whether the Treo 680 will stand out among the competition, of course, remains to be seen-but it may prove crucial to Palm’s fortunes.
The long lead time between Palm’s announcement and the availability of its latest device underscores the company’s predicament and a reality of the smart-phone market in the United States: it is a small but growing portion of the mobile handset market that once served primarily enterprise customers, Palm’s traditional base, but one now ruled by Research In Motion Ltd. and its BlackBerries. Recently, the smart-phone space has been invaded by devices with consumer-friendly pricing between $150 and $200 that are available today. Palm’s larger competitors have beaten it to the consumer’s doorstep.
Still, statistics for the smart-phone space seem to spell opportunity. Smart-phone penetration worldwide is about 7 percent of all phone shipments and only 4 percent in the United States, according to a panel at last month’s CTIA Wireless I.T. & Entertainment 2006 conference. Palm itself cited In-Stat research that projects that by 2011, one in four handsets worldwide will be a smart phone.
For carriers, smart phones-particularly the new breed of lower-priced offerings with simplified user interfaces that flaunt multimedia capabilities-show potential as data-centric devices that could spur adoption of revenue-producing services beyond voice as consumers download video and music, use various applications such as e-mail and location-based services and browse the Web.
Analysts have warned, however, that with RIM, Nokia Corp. and Motorola Inc. vying for the consumer end of the smart-phone market, Palm may suffer.
Indeed, last month Palm lowered its guidance for fiscal first-quarter (beginning Sept. 1) revenue to between $354 million and $356 million from previous guidance of between $380 million and $385 million. Last week’s announcement seemed designed to keep Palm in the news with promising products while competitors blow past it with their own, current offerings.
Palm said that the Treo 680 will offer feature-phone users an affordable, easy-to-use upgrade to a computing device with multimedia capabilities that will be available in four colors. The new Treo, one of four announced this year, is touted as slimmer than previous Treo models and as a “mobile computer” that will deliver the Web and e-mail to consumers seeking a balance between work and life. It will run the Palm operating system.
Palm said it expects the Treo 680, a quad-band GSM phone, to launch with 20 carriers around the world by mid-2007. Its public-relations agency added that soon carriers around the world will announce additional product details, availability and exact pricing.
But Palm’s new Treo 680 faces a crowded field. Early speculation in the press suggests that the 680 may retail for about $200, the new magic price tag for consumer-oriented smart phones set by the Motorola Q at Verizon Wireless this spring-a price point whittled down to $150 by Nokia Corp.’s E62 device, launched last month at Cingular Wireless.
These devices are already in consumers’ hands, as is a similarly priced RIM Pearl device at T-Mobile USA Inc. and a Cingular 3125 smart phone offering by HTC. A recently announced T-Mobile USA Dash model, also by HTC, is expected later this month.
“The competition has changed the rules of the game while Palm stood still,” Current Analysis’ Avi Greengart wrote recently in a report on Palm. “Palm’s Palm OS-based Treo provides one of the best balances between features, functionality and ease-of-use. However, the Palm OS is on life support, Palm’s Windows Mobile devices are upstaged by the competition from HTC and Motorola, and Palm’s primary competitive differentiator versus RIM-multimedia support-is no longer as compelling with the launch of the BlackBerry Pearl. Nokia and Samsung are circling, too.”
“All is not lost,” Greengart concluded. “Palm has sold over 3 million Treos and is solidly profitable”-and, apparently, toiling to maintain a foothold on a slippery slope.
