Why Palm will succeed, and Microsoft will fail – Palmsource CEO
Dave Nagel gives good demigod...
Armed with an impressive pile of research data, Palmsource CEO Dave Nagel mounted something of a troop-rallying exercise in London yesterday, and quite convincing it was too. But then you'd expect no less from a sometime industry demigod. It is not the case that the Palm platform is dead, doomed, about to be eclipsed by Redmond, says Nagel, unleashing another battery of heavy-duty Gartner - au contraire, it's in fine fettle, and Microsoft is maiming itself by trying to apply the wrong industry model to the handheld device business.
The wrong industry model in question is of course the PC one. In Nagel's view the only surviving name in the PC business that makes a profit is Dell, and this has been caused by Microsoft's commoditisation of the market. Similarly, Microsoft is now applying fairly rigid platform standards to the PDA and phone business (and in the latter case is even specifically attempting to unleash a wave of no-name cloners). Manufacturers going the Microsoft way therefore have little scope for differentiation, are forced to compete on price, and will get killed. Not that many of them are doing so - while the already-anointed PC ringwraiths have moved into the PocketPC market, the handset companies have looked at the model, looked at the history books and beaten a swift retreat.
But we've done this one before, haven't we? In the (still pretty convincing) world according to Nagel, the PC model won't work, the Palmsource approach of having a looser set of standards for a looser coalition of licensees will, and furthermore, having those licensees innovate and then put the results back into the pile means the Palmsource platform can and will develop faster than the Microsoft one.
Ah, but develop what? This is one of the areas where the contents of the Nagel research locker get seriously interesting, and the interpretation seriously industry demigodish. He unleashes a chart (data from Europe, the US and China), which has the handheld market itself showing modest but sustained growth over the next few years, the communicator market starting to go mega from now through 2006, and somewhere out in the middle distance, "other" going seriously mega.
Nobody yet knows what "other" is. Nagel's clipboard army asked people what they wanted, and by far the largest number said communicators. But half of them were interested in buying devices that don't exist yet. These could be games machines, notebook replacements (he said that twice, secretly he must really believe this one will work), or, well, "other." Nagel therefore paints a picture of another major transition where the new platforms will kind of invent themselves, and where the fleet of foot, flexible and innovative are the ones who will survive and succeed.
So in what way does Palmsource qualify? Its relation, Palm, currently leads the market, and despite appearances to the contrary even leads the corporate market (the devices are frequently bought personally and reimbursed, so the numbers can be difficult to track). Licensees include the mighty Sony and Samsung (both, granted, facing several ways at once), and Palm OS 5 is allowing the platform to transition to ARM without too much angst. And it's about units - crump! The research mortars lob in another salvoe showing Palm starting at $99, while PocketPC is just about making it down to $299. Nagel explains, rationally, that the intense slimness of the base hardware platform compared to the Microsoft alternative means it can always come in under its rival, and can always therefore sell more units.
And remember they researched China, where one might speculate that a $99 entry device could move pretty seriously.
Not, to get back to the plot, that it's particularly difficult to explain how you'll take care of Microsoft in this sector - what, though, about the Microsoft of mobile phones? What about Symbian?
The Palm platform is not currently dripping with licensees in the phone business, but despite the alleged interest of the public in the communicator business, the phone business has not been conspicously successful in selling it communicators. Clearly, they do not want that kind of communicator, and although there's likely to be something in the middle, it's not yet clear what that something will turn out to be. Maybe it's separate boxes, maybe it's something like the intensely cool-looking CDMA Kyocera 7135, maybe it's something else.
As Nagel pitches it the Symbian-Nokia alliance (for the sake of brevity we'll just call it an alliance, OK?) has a couple of key disadvantages. Nokia's ownership of the Series 60 UI is one of them, because it potentially gives the Finnish company Microsoft-style levels of control. Comparative lack of developer momentum for Symbian is another one; there are large numbers of Palm apps, large numbers of Palm developers, and nothing like as many of either for Symbian.
Nagel apologises for only having US stats on this, and muses that Europe might be better, but actually, it makes sense. Symbian is currently aimed at mobile phones, where yes, there will be apps but where we're not really talking a general purpose platform where you can see an obvious need for lots of different apps. Plus the phone companies are more control-freaky anyway. The general nature of the model means fewer apps, and that's not necessarily a bad thing, just different. But if the mysterious future devices turn out to be more general purpose, then yes, it'll be a disadvantage for the Symbian camp.
What, though, if the new devices, communicators or whatever turn out to be more rigid, phone-type devices along the lines of the Nokia 7650? This is where the Microsoft of mobile phones may turn out to have the advantage. Nagel points out that the US market is more datacentric, while Europe more phone-centric (we've done why this is many times, we won't again here). That's certainly an argument for why a $99 entry point PDA should succeed in the States, but it's not convincing for Europe.
Palm reps we spoke to afterwards see their own somewhat less visionary goal as to use this entry point as part of a campaign to educate people into using PDAs and grow the mass market, but it seems more likely to us that the sub-$99 entry point in Europe will be a phone. People will always have a phone, and with subsidies in Europe it's quite possibly a free phone. The service providers do not however like subsidising two box solutions (which was Psion's explanation for the ill-fated Odin project), so even the cheapest PDA will tend to be a lot less free than a phone.
Less PDA functionality on the phone? People wanting PDAs will still have to buy them? Yes and yes, but if the mass platform is the phone, steadily acquiring whatever PDA functionality people need, then the PDA market will tend to remain niche. But presumably, having thought of so much else, Nagel's already thought of that too. Another couple of more overtly phone-type licensees Real Soon Now, perhaps? ®