palmOne Must Not Lose Its Focus Again

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When Palm, Inc. split into palmOne and PalmSource in 2003, the two companies agreed to share the rights to the “Palm” trademark.

In late May, palmOne announced that it was buying the full rights to this trademark from PalmSource, and was going to change its name to Palm, Inc.

Last week, palmOne announced that it has been very profitable for over a year, while PalmSource has continued to hemorrhage money.

These events have caused many to suggest that it’s time for these two companies to give the idea of being separate, and palmOne should buy PalmSource.

There are arguments on either side, but I believe that the reasons why palmOne and PalmSource should remain separate companies are overwhelming.

Arguments in Favor of Merging

The most obvious argument in favor of these two companies merging together is financial.

PalmSource is in the process of developing Palm OS for Linux. This is going to take a lot of time and money, and money isn’t something PalmSource has a lot of.

As I said before, it’s had one unprofitable quarter after another, and last week it had another round of layoffs in an attempt to cut its expenses so it won’t run out of cash before it can finish up Palm OS for Linux.

palmOne, on the other hand, is making money hand over fist. If the two companies merged together, there would be a lot more resources available to the development team working on future versions of the Palm OS than there are now.

The second reason in favor of palmOne buying PalmSource is control.

It’s pretty clear to me that palmOne isn’t very happy with what PalmSource has been doing with the Palm OS since the split.

I don’t know exactly what it is about Palm OS Cobalt (6.x) that palmOne doesn’t like, but there must be something. It has never put out a Cobalt model, and I believe it never will.

Instead, it continues to use Palm OS Garnet (5.x) on all its handhelds and smartphones, and when it finally changes that, I’m guessing it will go straight to the Linux version.

If palmOne once again owned PalmSource, it would have the ability to control the development of Palm OS for Linux, and could assure that this version of the operating system is more to its liking than the previous one.

Arguments in Against Merging

palmOne and PalmSource split into two companies for a very good reason, one that still holds true.

Back when they were together, Palm Inc. was unwilling to give a Palm OS license to any company that would directly compete against its hardware.

The best known example of this is Toshiba, which, before it became a Pocket PC maker, was denied a Palm OS license.

I’m sure this would be true again if a single company made both hardware and operating system. There would be few licenses given to companies that wanted to make smartphones to compete with the Treo.

But there’s another reason why palmOne shouldn’t buy PalmSource, one that I think trumps all other arguments: focus.

Whenever a company goes through a major change, it’s tremendously distracting to all the employees, from the CEO to the guys who work in the mail room.

There was a time when the Palm OS was way ahead of Pocket PC in ease of use, elegance, and other factors that let it dominate the handheld industry. But over the years, Pocket PCs have improved dramatically, while the Palm OS has stagnated.

The reason for this is clear to me: Palm has gone through one major corporate change after another, and these have kept the employees from concentrating on their main goal: making handhelds and smartphones.

It took about three years to go from the Palm V to the Palm m515, a model that essentially was the Palm V with a color screen. Why did it take so long? Because Palm Inc. was going through its IPO, and half the company’s focus was on that.

It took Palm/palmOne three tries to make the Tungsten T3, the model that the Tungsten T should have been in the first place. Why? Because it was distracted by the PalmSource split off, and its merger with Handspring.

After almost two years, palmOne finally seems to have recovered from all the distractions caused by its split from PalmSource. As evidence, we have the LifeDrive, the best model this company has come out with in years.

If palmOne bought PalmSource, there would be another long period of adjustment during which palmOne employees would be thinking too much about whether they are going to be laid off and not enough on how to make better devices.

And let’s not forget that palmOne doesn’t have any time to waste. It is no longer the biggest handheld maker in the world, and its share has been dropping for a while. It needs to keep focused, or it’s going to end up as a tiny niche player on the mobile market.

So, to me anyway, it seems obvious that the disadvantages of palmOne buying PalmSource vastly outweigh the advantages.



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