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Palm reportedly has 1.5 million unsold Palm Pre and Pixi units. It has halted sales, a sign of the company's deep problems.  (Source: Palm via VentureBeat)
Bad news continues for veteran mobile device maker

Palm, maker of the Pre and Pixi smartphones, is facing desperate times.

American Banking News
 has reported that Palm's production halt continues as it is unable to sell the stockpile of webOS handsets it has built up.  There's no official word from Palm, but the announcement seems likely to be true as Palm stock plunged 30 percent to around $4 a share following the news.

Palm has a rich history and helped to launch the PDA and smartphone movements.  Lately, it has struggled to keep up with Apple iPhone and Research in Motion Blackberry smartphones.  And smartphones have largely killed the market for PDAs, so Palm can no longer seek refuge in that market. 

In 2008, Palm saw the writing on the wall and made an ambitious bid to retake the market.  After much investment, it unveiled webOS, its new smartphone operating system.  In June 2009, the Palm Pre launched on Sprint, America's third largest wireless carrier.  

Commentary on the smartphone and its OS was mixed, but overall was somewhat positive.  The interface was much like the iPhone, but it lacked the iPhone's extensive app library and used slower interpreted code for apps (as opposed to native code).  Perks, though, included multitasking and a physical keyboard.

Since the launch of the Pre, Palm has done its best to beef up its offerings, releasing the cheaper Palm Pixi handset and the Palm Pre Plus on Verizon, the nation's largest network (Sprint was the first to get the Pixi).  It also released a new software development kit that allowed native application code via the Simple Direct MediaLayer.  The results were impressive -- Palm devs were able to quickly port both Doom and Quake to the phone, a feat impossible with interpreted code.

For all that effort, Palm's sales continued to slip as it saw Apple and RIM post gains.  People simply didn't seem interested in the Palm handsets.  

Over The Air
 in February reported that Palm had shut down its production of webOS handsets.  Palm claimed at the time that the shutdown was temporary -- just a closure for the Chinese New Year.

Now it appears that the shutdown was not just for the holidays.  Palm's poor sales, showcased by its miserable Q1 2010 calendar quarter (its fiscal Q3 2010), are catching up to it and it is developing a large overstock of webOS phones.  According to Morgan Stanley Analyst Ehud Geldblum, Palm this quarter produced 960,000 phones, but amazingly has only sold 408,000 of them.  The total overstock is estimated to be 1.5 million units, following a 29 percent drop in sales in the first quarter of this year, which ends at the end of this month.  Palm's revenue has reportedly dropped $22M USD over the current quarter.

To put Palm's unfortunate failure in context, Google's Android sold 5.5 million units in Q4 2009 and Apple moved 7.5 million iPhones.  That means that Palm's sales for entire quarter are approximately the number of units Apple or Google sell in a single week.

Even if Palm was incredibly able to continue the sales pace of its Pre and Pixi (which is perhaps possible given its new Verizon contact), it would take nearly a year before it could sell off its stock.  By then new Android handsets would have arrived, a new iPhone, and Windows Mobile 7 -- all while Palm is stuck trying to unload increasingly dated handsets.

Palm will likely be forced to turn to deep discounting.  At first blush this might seem happy news for the consumer, but ultimately it is 
not a good thing as it will hurt Palm badly, which in turn will hurt Palm's ability to promote a successful app market for consumers.

Despite all the bad news surrounding Palm these days, there was a bit of good news for the company today. AT&T announced that both the Pre Plus and the Pixi Plus will be heading to its network “soon”.


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RE: Web OS is closed OS = doomed
By omnicronx on 3/22/2010 3:19:32 PM , Rating: 4
Yep, thats preware. Its also worth noting at unlike the iPhone, you can install it without cracking your phone.

RE: Web OS is closed OS = doomed
By Ananke on 3/22/2010 3:59:29 PM , Rating: 1
I work for marketing. My point is that 99% of users, who btw are not technically-savvy, don't have any idea of homebrew applications. That's the fundamental reason why a certain gadget cannot sell. Cheap = sell, a little bit expensive = fail. Palm is a little bit more expensive.

Similarly RIM gained moment because of non-existing competition in the business market. They were lucky, but the business market has changed for the last two years. Companies have no choice, but to trim expenses, and RIM phones overall cost more. Simple fact. It is my opinion they also cannot stand a chance against the open platforms coming. It is just a matter of time.

RE: Web OS is closed OS = doomed
By CyborgTMT on 3/22/2010 9:22:04 PM , Rating: 2
My point is that 99% of users, who btw are not technically-savvy, don't have any idea of homebrew applications.

I'll argue that point. Of all the Pre owners I know, every one of them knows about homebrew apps. I was told about them when I bought my phone by the Sprint rep.

And what are you doing with a smartphone anyway if you aren't a bit 'tech-savvy' to begin with?

By snakeInTheGrass on 3/23/2010 10:32:05 PM , Rating: 2
Was that 99% of Pre users or 99% of smartphone users in general?

I'd imagine you could be non tech-savvy and just using a smartphone for email, web access, and an easy way to get entertainment or other functions - while hopefully avoiding driver issues, virus scans, and other 'real computer' crap.

I always love the idea of 'you can just fix the kernel yourself!' as a selling point for Linux, and likewise home-brew is a general positive point - for tech folks. However, my mom who is "running the 'e' or 'running Google'" would surely be thrilled to be able to modify her machine's kernel - and home-brew apps would probably be equally appealing for her phone.

RE: Web OS is closed OS = doomed
By Patrick Canney on 3/22/2010 9:48:10 PM , Rating: 2
99% is a huge generalization, but you do make a good point.

Homebrew will never really make a product sell either, if it's not pushed by the creator, it's not general knowledge.

I would say android is the greatest success of linux though, such a huge penetration of the smartphone market, and it works like magic. I think MS have really been paying attention with the development of win7.

I only see RIM's days numbered, but then there is always that group of people who want one just because it's a Blackberry. I haven't used a BB since the pearl.

MS should open up it's Live arcade service though to support more devices like the andriod. Hardware variation obviously a big factor there though.

If it wasn't for the might of Google flexing it's muscle and pouring dev $$ into it and and structuring it right, open software wouldn't be doing so great in the consumer market right now. Which as far as i am aware, every other phone OS is closed. There's sony and everything, but i thikn the PS3 is about as great as they have done.

I'm considering the HTC Desire, or Bravo as we call it in the U.K. If only it was embodied in the same case as the Legend :(

That and maybe a new for crimbo PC running openSuse, with win 7, and maybe OSX if i can be assed.

RE: Web OS is closed OS = doomed
By oab on 3/22/2010 10:57:18 PM , Rating: 2
And Microsoft should port Halo to the PS3 as well! Think of how many units they would sell!

RE: Web OS is closed OS = doomed
By Patrick Canney on 3/22/2010 11:31:40 PM , Rating: 2
Bungie probably could if they wanted to as long as they aren't bound to Microsoft contract which I'm sure they are ;)

Microsoft were the first to bring us a Marketplace for your console which was tied to Live. Part of that is the Live arcade. It's not completely out of the realm of possibility that the future of gaming will be internet delivery from service providers.

Such as Microsoft, Sony and Nintendo. Who knows.

The publishers are also starting to use more and more "always on" games connected to the internet. Steam has gone Mac.

The only thing is that you wouldn't have to re-buy everything for a new/different system. Shareholders want you to buy everything ten times over anyway for all your devices though.

"content delivery" is where the money is at.

Steam. PSN. iTunes. Live. Guitar Hero. etcetera.

RE: Web OS is closed OS = doomed
By clovell on 3/23/2010 11:55:27 AM , Rating: 2
Nah, Bungie wouldn't do it; Gearbox would. And they'd f*ck it up, too - again.

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