The decline and fall of the Palm empire

If Palm remains on its current trajectory, the company is history

The once-mighty Palm, still successful on paper from the momentum of past glories, is doomed to decline and failure. It wasn't always thus. Here's my preemptive post-mortem.

About 12 years ago, I met with a man I didn't know, working for a startup I was unfamiliar with to see a product I'd never heard of.

The man was Ed Colligan. The startup was Palm Computing (though it had recently been acquired by modem maker U.S. Robotics). And the product was code-named "Touchdown," later to be branded the "Palm Pilot."

At the time, I was executive editor of a computer magazine, and Palm was just one of a dozen or so companies scheduled that week. Most of those meetings were forgotten minutes after they concluded. But the "Touchdown" meeting was a revelation. Colligan, now president and CEO of Palm, left me a device to test.

At the time, there were dozens of electronic organizers on the market. But the Palm Pilot blew them all away with its radical ease of use and zippy performance.

Since then, I bought seven Palm OS devices: Palm Pilot 1000, Palm III, Palm IIIxe, Palm VII, Palm Vx, Treo 270 and Treo 650. I even published for a couple of years an e-mail newsletter devoted to the platform called, "The Palm Reader."

The company invented the first great "connected organizer," a PDA that synchronized with desktop applications like Microsoft Outlook and Lotus Notes. A software developer of almost any skill level could create applications for it, and thousands did. Later, the founders of Palm invented the first great smart phone -- essentially a Palm Pilot that made phone calls. They were cheap, simple and fun to use.

The genius behind both these inventions was, of course, Jeff Hawkins. Together with co-founder Donna Dubinsky, Hawkins launched the companies and invented the devices that transformed -- and, for a time, dominated -- mobile computing.

The Palm Pilot was great for the same reason iPods, Macs and other Apple products are great. In each case, development was lorded over by a design and usability fascist driven by a powerful vision of the complete user experience.

What went wrong?

The tragic story of Palm's fall from greatness is a history of squandered resources and misplaced effort.

As transcendent as the company's product and design decisions were, its business decision-making was always problematic.

It all started when the founders of Palm raised money for the first product launch by selling the company to modem giant U.S. Robotics in 1995. The founders gained the cash they needed, but lost full control of both the company and the product -- forever.

One year after U.S. Robotics was acquired by 3Com in June 1997, the founders left the company in disgust and launched Handspring, which eventually developed the first good mass-market smartphone, the Treo. 3Com made Palm an independent, publicly traded company in March 2000. In January 2002, Palm disastrously spun out its software division as an independent company called PalmSource. Then, in August 2003, the company merged with Handspring and renamed itself PalmOne. In April 2005, the company, now called PalmOne, spent US$30 million to buy the "Palm" trademark from PalmSource, and changed its name back to Palm. In December 2006, Palm paid $44 million for access to the Palm OS source code it used to own, so it could make its own software again.

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Mike Elgan

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