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Analysis: Where does Palm go from here?

Outlook bleak after gloomy smartphone forecast

Carrier relationships

Expanding carrier relationships might be key to Palm, at least for the next few months, all the analysts said.

"In the phone space, success is about good carrier relationships," Gold said, noting that Palm's webOS was first tied to Sprint Nextel, the no. 3 carrier in the US market, before expanding to others, which slowed adoption of its products.

Today, Palm talked about its carriers, saying in a statement that its "carrier partners remain committed," even as it added a somewhat contradictory comment that carriers had ordered lower-than-expected volumes of Palm products and had deferred orders to future periods.

A Dow Jones News Service report on Wednesday quoted Canaccord Adams analyst Peter Misek as saying Verizon Wireless was evaluating whether to drop its Palm Pre Plus and Pixi Plus smartphones from shelves. But a Verizon Wireless spokeswoman later called the Palm devices "important" in Verizon's smartphone lineup.

Then today, Verizon issued a press release that seemed to be an endorsement of the Palm Pre Plus and Pixi Plus, using the headline 'Apps on Palm Smartphones Shine on Verizon Wireless' 3G Network'. A Verizon spokeswoman said the release was in the works before reports of Palm's poor sales surfaced, and added that Verizon will continue to support Palm devices with its marketing efforts.

How did Palm get here?

One reason is that while Palm needed to update its Palm OS, its new webOS announced in early 2009 wasn't immediately compatible with its older one. "Palm's had no momentum with webOS," Gold said. "They had a loyal base with Palm OS and then turned them off when they went to webOS."

The webOS also wasn't launched with many applications and no real blockbuster apps, analysts added. Plus, Palm's application store hasn't done that well and is costly to support, leading Gartner's Dulaney to suggest that Palm close it down and sell applications in a leading application storefront instead.

Aside from the intense competition from other OSes, Palm has suffered by not having strong global reach to sell its products and hasn't marketed its smartphones well, the analysts said.

"Palm's marketing was always sub-par, and it can't afford to do what Apple and Google do," Gold added. "It also doesn't have the brand recognition. Apple sneezes and everybody gets a cold, while Google smiles and everybody thinks it told a funny joke. Palm doesn't have the same cachet."

Carl Howe, an analyst at Yankee Group, put it another way: "Palm isn't a market leader. Consumers like to buy what their friends and family have and like, and because few people already own webOS devices, they don't get that recommendation buzz that other handsets do."

See also:

Palm lowers smartphone revenue expectations

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