Palm confounded the industry observers who predicted it would announce an acquisition Thursday, focusing instead on R&D and marketing strategies that would improve its market share position.
Motorola was widely expected to be Palm’s suitor, though Nokia, Dell and HP were mentioned as well. In a conference call announcing in most recent financial results, Palm reported revenue of US$354.1 million, and said it shipped 774,000 units.
Palm chief executive Ed Colligan refused to directly address the rumours, emphasizing its organic growth plans.
“We shipped two new smartphone platforms and have four in production. Our channel inventory has been managed exceptionally, and balance sheet remains strong,” he said. “We are excited about a number of developments we have underway.”
Colligan said Palm was developing hardware reference platforms that will expand the range of products it can offer and deliver them faster. They will allow it to ship with different operating systems, form factors and reduce the complexity of its products and components. It is also in the process of opening an R&D centre in China. New marketing campaigns, meanwhile, will be aimed at drawing in a less technical audience, he added.
Carmi Levy, an analyst with London, Ont.-based Info-Tech Research Group, said Palm needs to do something to raise it above also-ran status among the other handheld choices out there.
“If you’re an IT manager deploying a whole bunch of Palms on your infrastructure, you can’t just make one phone call and make it happen. Essentially it’s a cobbled-together solution,” he said.
Ian Grant, an analyst with the SeaBoard Group based in Montreal, said an acquisition would allow Palm to reassure those companies that have been on the fence about the Treo as a business device.
“Having a parent would bring much a more stable imprimatur and show that the DNA is going to survive. That way you’re not taking a huge risk by recommending the deployment of additional Palm handsets.”
Palm has faced increasing competition in the handheld market following Microsoft’s decision to develop a PocketPC operating system for personal digital assistants. Consumer electronics specialists Toshiba and Casio came out with devices last year, while Compaq’s successful iPaq product survived its merger with HP. RIM’s BlackBerry and Motorola’s more recent Q handheld have also crowded the market with alternatives for business users.
Palm responded by reorganizing its product line in 2002 into a high-end enterprise segment, served by its Tungsten devices, and the consumer segment, served by the Zire handhelds, but has been emphasizing the Treo’s capabilities. It also formed a partnership with Microsoft last year whereby Palm users could opt for Windows Mobile.
In other news, Palm announced Thursday that a U.S. court granted a stay of proceedings in the patent infringement litigation brought against it by NTP, the same holding company that pursued RIM over its BlackBerry patents.