Why Palm Failed

The beginning and end of Palm's failed reemergence this year makes its flagship Pre phone look like a Hail Mary, a complex all in at a poker table with players it didn't understand. Yes, in light of Palm's announcement this week that it's for sale, it does make sense to attribute at least some of Palm's strategic incompetence and ultimate fumbling of everything (except the phone itself, which was great) to a kind of dooming go big or go home pressure. Because while the Pre was never going to be the iPhone killer newspapers loved heralding it to be, the product itself certainly had enormous potential.

No, it's not the software developers and engineers who are to blame, it's those who brought the phone to market. These people, worse then fumbling the ball, caught the hike and blindly lobbed it back into the mess surrounding the line of scrimmage. The spiral that ended with Palm's flop was one of continuously horrible marketing decisions, badly implemented partnerships with network providers and a disorientated branding strategy.

For starters, the release of the Palm Pre was immediately dwarfed a week later by Apple's announcement that it would be releasing its iPhone 3GS by the end of the month. Palm then chose to initially sell the Pre exclusively on American's third largest provider, AT@T, in exchange for an investment in advertising the phone. However, the ensuing marketing campaign ended up focusing more on AT&T's own branding then it did on the Pre. When Palm finally decided to move the Pre over to Verizon, America's largest provider, the company was told it would have to wait until January. This was highly problematic because come Christmas the Verizon customer market would be saturated with the Motorola Droid, a very slick and powerful smartphone released in December and backed by a $100 million holiday advertising campaign.

Palm's next big blunder involved its second phone, the Pixi, a less powerful and cheaper smartphone then the Pre. While the phone had strong reviews, the initial marketing approach took on a slightly feminine slant that quickly left the phone with an image of exclusivity for women. With half of its buyer base alienated, sales never took off.

So come April, Palm found itself with a blown marketing budget, a stock price 70% less then its high and most of its products collecting dust on shelves across the county. The only bright side seems to be that its For Sale sign will be hung and managed by Goldman Sachs. Though even that is looking less and less like good news.