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What sealed Palm's software fate?

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Back to Palm, which in 1999, finally saw its IPO from 3Com appearing on the horizon. Palm's executives were initially wary of the platform pitch. Why not stress the wholeness of the Palm product, a runaway hit?

Alas, they buckled, and went with the flow. So Palm was obliged to seek licensees, finding at first vertical industry OEMs like Symbol, and later, a marquee name in Sony. An ego-driven squabble that drove out Palm's founding trio also presented it with another, in the shape of Handspring. These indeed made Palm look like a "platform".

But should the Palm umbrella follow the platform logic and spin the software operation out? After a few strategy swerves, it eventually it decided it should, but by that time the market had changed. The PDA market was shrinking, and for phones Palm had a venerable OS that was technically suitable for, but too expensive to build into, low end phones. For high end smartphones it had a capable but immature and untested OS that made too many demands. And it found a market of phone manufacturers who weren't prepared to offer more than lip service to anything outside their core portfolios: witness the tepid interest in both Microsoft and Symbian outside of Nokia and outside a few flagship products. So Palm software found itself a "platform" at precisely the worst time: when it had nothing serious to offer the market.

And here Apple's recent experience offers us an alternative history. For twenty years, Apple only ever had one hit product, the Mac. For most of these twenty years it was being urged to become a "platform", too. When it attempted to do so, licensing the MacOS to rivals, the results were catastrophic. But today Apple has the mindshare across two new market categories that it wouldn't have had a hope in if it had followed the horizontal ideology. The iPod wouldn't have been such a success if it had been at the mercy of Windows Media Player. And the iTunes Music Store, not exactly a profit center to boast about, nevertheless wouldn't have gained the publicity it has without the iPod and iTunes. Both are examples of Apples ability "to make the whole widget" and both are triumphant rejections of the horizontal ideology.

Today PalmOS' new owner Access has vowed to continue offering its Cobalt and Garnet operating systems, but as critics have pointed out, it really bought PalmSource for its Chinese Linux presence - in which case $324 million looks like a bargain. But could Palm's fortunes have been any different if it had refused to play the platform game?

Remember that Wall Street's horizontal mania is based on an assumption that customers will not pay a premium for a product from a vertically integrated manufacturer. It supposes that we won't pay a premium even if that buys quality. And the world is awash with cheap rubbish.

Ironically, Palm Inc. in January 1994 was a small software company, warily facing the prospect of making its own hardware. Apple had spent $200 million on the flop Newton, and the tiny start-up had just $3 million in the bank. The decisions it took that year to bring 'Touchdown' - the original Palm Pilot - to market were exactly the limitations that made it a success. But limiting its capabilities also made it difficult to turn into two strong "platforms". Given the calibre of executive leadership, even the most enthusiastic PALM stockholderwill have their doubts things could have turned out any different. But do send us your alternative Palm histories anyway. ®

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