Palm's smart smartphone marketing
11/22/2009 by: John Oram
Staying afloat year in, year out in the smartphone market place is difficult. Palm reminds us of the Ever Ready Energizer Bunny's slogan of "it just keeps going and going." Palm invented the Internet-surfing pocket-computer phone with its Treo 600 in 2002 even though we could dispute that claim by mentioning Nokia's 9210 Communicator. However, given that 9210 didn't support GPRS and Nokia was pushing WAP as "mobile Internet", the title of first consumer-usable Internet-browsing device will stick with Treo 600. The phone used a "powerful" 144 MHz CPU and 24MB of memory. Palm continued to own the market until about 2007, all the while RIM kept steadily enhancing their Blackberry line. Then in 2007, Apple did a slam dunk with the iPhone and took the game away from everybody.
In June, Palm introduced the Pre with webOS sitting exclusively on the Sprint network. Some said the Pre would shove the iPhone into the trash heap. However, Sprint's third place in the US mobile carrier race, along with their loss of millions of subscribers over the past three years, has not helped Palm's overall sales numbers.
Why has Palm stuck it out with Sprint? Dan Hesse, the CEO of Sprint, is a consummate marketing guru. Hesse put himself into Sprint's TV ads and basically admitted they were an underdog. Hesse spent lots of marketing dollars keeping the Palm Pre name in front of the public. Sprint is chief sponsor for NASCAR and has run some pushy ads putting down Apple's iPhone.
Along the way Hesse offered "Simply Everything," a convincing data and calling plan that includes a long list of features:
- Unlimited data: Web surfing, email, BlackBerry Internet Services [BIS], GPS Navigation, Music Premier, TV Premier, NFL Mobile Live, NASCAR Sprint Cup Mobile.
- Unlimited Direct Connect: Direct Connect and Group Connect [for capable phones]
- Unlimited messaging: Text, pictures and video.
- Unlimited talk: Unlimited anytime minutes, nationwide long distance and no roaming charges.
Last week, the Palm Pixi arrived for $100, again exclusively on Sprint. If you act fast, you can purchase one at Amazon for $24.95 with no activation fee. If you want your Pixi to run on another CDMA network, you will shell out $359 to Amazon.
Palm Pixi Phone deal at Amazon.com - $275 in savings
The Palm Pre is now just $79.95 at Amazon, also without an activation fee. That is a big drop from the Pre's introductory price of $299, less a $100 mail in rebate. If you want to simply buy a Palm Pre without service, it will cost you $499 at Amazon.
Everybody knows that AT&T pays Apple a ton of money for iPhone exclusivity. Sprint isn't talking about how much they are subsidizing Palm for each new Pre or Pixi subscriber. The above discounted prices indicate that Sprint is paying "something" to Palm for that exclusive deal.
Palm is now selling their Pre in six countries, including the US and Canada. There is also a GSM version shipping to non-CDMA carriers, especially in Europe. Clearly Palm is poised to increase their sales volume. Elevation Partners http://www.elevation.com/ , Palm's venture capital funders are also looking for a return on their significant investment.
Jon Rubinstein, Palm’s CEO, as a previous Apple engineer who headed its iPod Division, said in an interview with New York Times that Palm can thrive without being as big as its rivals. Apple, for example, has made significant profits for their shareholders selling to a niche in the computer business.
While it may be true that Palm need not match Apple’s with their more diversified Apple products, they do need to move a lot more handsets out the door. The original Palm Treo 600 was on all four of the major US carriers: Verizon, AT&T, Sprint, and T-mobile, as well as many world-wide carrier's networks. That remained true until the Treo design started to stagnate as the competition caught up and offered more features for subscribers’ money.
Market research firm IDC tracks smartphone sales in the US. For 2Q 2009, they ranked Palm Pre at #8, in 3Q the Pre moved up to #6. The jump was due in part to increased supply and price cuts at Sprint and resellers. Also, Palm's Pre was only on the market for the last one-third of the second quarter. Apple's iPhone 3GS is #1, and RIM's Blackberry models own six of the top ten spots – including #2 and #3. T-Mobile's My Touch 3G, the only Android device in the top ten is in #8 position. In fourth quarter, we expect to see Motorola's DROID arriving into the Top 10 charts.
Motorola DROID attacked both Pre and iPhone with attractive deals even going through DELL.com
How will Palm get more of a market share? Often the last resort is a price drop, which is happening at Amazon. However, there can be other reasons for that price drop.
Thirty years ago, I was involved in selling large volumes of products manufactured in Taiwan. They came to the US by container ship load and had a landed price of "X" including duty fees. We also had to maintain an adequate volume of sales to get the lowest prices from the Taiwan manufacturers. We paid Taiwan manufacturers "C" which was significantly less than "X". We started selling the widgets for "G", which was a healthy margin over the landed cost. As the supply in our warehouses dropped and new product was going into containers in Taiwan, our "G" selling price started to slide down.
We bet that Palm has new handsets in the early stages of overseas production. The rumors are that Palm will be selling to Verizon in 1H 2010, and to AT&T by 2H 2010. Palm will be making a significant marketing effort aimed at mobile carriers in the EU, Asia, South America, Caribbean, and Africa, just like the old days when they were a leader in the smartphone world.
CES 2009 was where Palm made their splash with the Pre. CES 2010 is coming fast, the first week of January. It would be a good marketing move to again grab attention with an updated Palm Pre and Pixi, along with an expanded line of products.
The smartphone CPU development curve is moving up at a rapid pace and ARM still owns it. Last summer, Samsung showed a single-core Cortex-A9 running at 2GHz. In October, ARM announced their Cortex-A9 MP IP which supports both dual and quad core designs. ARM is also mating their Mali graphics IP into the Cortex-A9 SoC. Last month, GlobalFoundries and ARM announced development plans for 32/28nm SoC chips. At the ARM TechCon3 Developers Conference, we saw a Quad-core Cortex-A9 MP prototype running Linux. In the video those flashing LED's are attached to separate cores. ARM is clearly not waiting for Intel and the other competitors to pull along side them.
Next year’s smartphone offerings will be very interesting. We will be at CES 2010 for their introduction with a full crew to bring you the latest big news and show you things that others may overlook.
Tags:
CES, Palm, Pre, Pixi, Cortex-A9, ARM, smartphone, iPhone, Taiwan, RIM, Blackberry, Apple, Sprint, Don Hesse, AT&T, webOS, NASCAR, T-Mobile, Android, Jon Rubinstein, Amazon, Palm Treo 600, Verizon
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