As you may or may not have heard by now, one of Palm, Inc.’s top shareholders is in favor of selling the company.
In case you missed the story, Mark Nelson, who owns almost 7 percent of Palm, has let its board of directors know that he thinks the company should be acquired.
Not surprisingly this has made headlines all over the world, and he makes a good point or two, but I think he’s being overly pessimistic.
Competition, Disintermediation, and Commoditization
Let’s take a closer look at his arguements and you’ll see most of them don’t hold much water.
- Competition: While he admits that the Treo line is doing well, he points out that there are many big-name companies coming out with competing products. He doubts Palm will be able to keep up.
I have a simple answer for this: it’s done it in the past. Palm has competed successfully against huge companies since its inception and it has done just fine.
- Disintermediation: This is a three-dollar word for saying that Palm doesn’t sell many of its products to the public; it sells them to wireless carriers, who then sell them to customers.
Here’s where Mr. Nelson and I agree. (I’ve even written an editorial on it.) There’s no doubt, this is going to be Palm’s biggest problem going forward.
See, what I want and what the carriers want me to have are often different things. For example, the Treo 700w doesn’t have Bluetooth DUN because Verizon doesn’t want me to use the device as a modem for my laptop. What I want doesn’t seem to matter much.
But I think Palm can deal with this. It won’t be easy, but it must convince the carriers that what’s good for the users is good for them.
- Commoditization: Mr. Nelson believes that, in the future, smartphones will become all alike and people will just buy the cheapest one.
This doesn’t have to happen. There will always be a market for good, innovative products.
Been There Before
I’m sure Palm’s Board of Directors could find a buyer for the company, and the vast majority of its investors could make money.
But it would be a disaster for us Palm users, and possibly for the company itself.
Palm has been a small division in a much larger organizations before — U.S. Robotics and then 3Com. It didn’t work out very well.
The larger companies didn’t really understand the market Palm was in, and kept trying to stifle innovation. They wanted nice, safe products with high-profit margins.
In this situation, the best and brightest employees tended to get frustrated and leave.
I can’t see a good reason why Palm should voluntarily subject itself to this again, especially considering how successful it is.