What happened to Palm?

Palm, Inc. was an American manufacturer of personal digital assistants (PDAs) and other electronics. founded in 1992 by Jeff Hawkins, its popularity tended to be restricted to early adopters. Despite the company revolutionizing mobile computing, it no longer exists today. Palm’s demise was caused by poor decision-making, squandered resources, and misplaced effort. The company got stuck in the “chasm.”

Background

Palm, Inc. was an American manufacturer of personal digital assistants (PDAs) and other electronics.

The company was founded in 1992 by Jeff Hawkins, who together with Donna Dubinsky and Ed Colligan invented the Palm Pilot. The Pilot was one of the earliest and indeed most successful PDAs of its time, making the Palm brand synonymous with technology and innovation.

Although a revolutionary product, the Palm Pilot was not a mass-market consumer item and its popularity tended to be restricted to early adopters. Nevertheless, it was less than half the price and more feature-rich than its main competitor the Apple Newton. 

technology-adoption-curve
In his book, Crossing the Chasm, Geoffrey A. Moore shows a model that dissects and represents the stages of adoption of high-tech products. The model goes through five stages based on the psychographic features of customers at each stage: innovators, early adopters, early majority, late majority, and laggard.

Palm also created several versions of webOS – an operating system for smartphones, and the enyo.js HTML5 framework for apps.

Despite the company revolutionizing mobile computing, it no longer exists today. Palm’s demise was caused by poor decision-making, squandered resources, and misplaced effort. 

Let’s tell that story below.

U.S Robotics Corp. acquisition 

The trouble began when the Palm founders sold the company to U.S. Robotics to fund their first product launch.

Unfortunately, securing the necessary funding came with a heavy added cost. Hawkins, Dubinsky, and Colligan lost control over the company and the product forever. 

One year later, U.S. Robotics was acquired by 3Com. This caused the founders to resign and launch Handspring, the developer of the first mass-market smartphone called the Treo.

Meanwhile, 3Com made Palm an independent, publicly tradeable company in March 2000.

Spin-offs, mergers, and corporate mismanagement

In January 2002, Palm made the disastrous decision to spin out its software division into an independent company called PalmSource. 

Just over twelve months later, Palm merged with Handspring and became PalmOne. In a rather convoluted process, PalmOne then spent $30 million buying the Palm trademark from PalmSource and subsequently changed its name back to Palm.

This was followed by another costly decision in December 2006 where Palm paid $44 million to access the Palm OS source code it developed and once owned.

Generic products

Corporate mismanagement also changed the very culture of the company. In the early years, Palm won multiple design awards for innovation with a laser-like focus on product quality and invention.

As the company started to become more successful, it became preoccupied with corporate partnerships, new markets, and bland product launches. Indeed, Palm products became progressively more generic and uninspired as control over the company shifted from product visionaries to executives in suits.

Competition and HP acquisition

While Palm smartphones were the first of their kind, they couldn’t compete with offerings from Blackberry and then Apple. Blackberry offered internet capability instead of just email, while Apple upped the ante significantly with the release of the first iPhone in 2007.

Importantly, the iPhone was a complete, standalone device that did not need to be synchronized with a computer like the Pilot. In response, Palm released the Palm Pre in 2009 which ran on a new operating system called webOS. The Pre was plagued with quality control issues, including screen cracking, faulty headphone jacks, and design issues with the slide-out keyboard. It was also built on underlying hardware which made it slower than the iPhone.

Palm could not compete with the emergence of Apple and was acquired by HP in 2010 for $1.2 billion. HP tried to address the quality control issues but was ultimately unsuccessful in increasing market share. 

It later sold webOS to LG who now use it to power smart televisions. The Palm brand itself was later sold to a shelf corporation tied to the Chinese electronics company TCL.

Key takeaways:

  • Palm was a revolutionary producer of personal digital assistants considered to be the precursors to the smartphone. 
  • Palm squandered its first-mover advantage because of poor decision-making and mismanagement. The company undertook a series of convoluted spin-offs, mergers, and acquisitions where funds were needlessly spent buying back its own technology and trademarks.
  • Palm was also handicapped by a change in corporate culture that favored bland and uninspiring products instead of innovation. It could not compete with Apple who embodied the innovative traits Palm once stood for.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"