Overall, I'm very happy for the folks at Palm, and cautiously hopeful about what this might mean for the company's prospects. I think this outcome is a lot more encouraging than any of the buyout rumors that were floated in the last few months. Palm's new part-owners clearly understand the value of systems design, which is Palm's biggest potential advantage in the market. I think we really need another great systems company to challenge Apple, and I would love to see Palm step up to that task.
Although a purchase by a Motorola or Nokia would have been very entertaining from a soap opera perspective, they don't really understand systems design, and it's very likely that they would have digested Palm without a trace. I'm reminded of a joke we used to tell at Apple in the 1990s when there were rumors that IBM would buy the company:
Q: "What do you get when you combine Apple and IBM?"
A: "IBM."
The other buyout option what was circulating, a full purchase by private capital, would have left the company independent, but with a load of debt that might have been crippling. Hardware companies must have a big reserve of cash to fund inventory and tide them over if they launch an unsuccessful product. I don't pretend to understand all the terms of the Elevation deal (they're wickedly complex), but from my perspective it looks like the financials aren't crippling. I am a little worried about Palm's cash levels, though; a lot of their current cash is going into the stockholder payout.
A couple of other thoughts on the impact of the deal:
Bye-bye 3Com. Palm gets three very well respected people for its board, and removes Eric Benhamou, the last vestige of the 3Com legacy. Somewhere I have a photo of the Palm and PalmSource combined management teams from just before the two companies were separated. The photo includes everyone in the company from Mr. Benhamou down to senior directors. That was about 30+ people. Every single one of them is now gone. So if you didn't like Palm's management back then, you should take another look at the company because it's now 100% different.
Irresponsible speculation about politics. After a change like this, the standard sport in Silicon Valley is to speculate about what it means for the job status of the people involved. In that vein, the thing to ask is, "Who's running Palm in the long run?" The weirdest part of the whole Elevation deal is the arrival of Jon Rubinstein as both Chairman of the Board of Palm and head of product development. As Chairman, Jon is technically the boss of Palm CEO Ed Colligan. As head of product development, Jon technically reports to Ed. So Jon is kind of his own second-level manager.
That feels...unstable.
Palm seems to now have a surplus of product leaders. Jon is in charge of product development, Jeff Hawkins is the designated product visionary, and marketing SVP Brodie Keast is supposed to control the product road map, according to the press release Palm issued when he was hired. It's hard to picture a car with three steering wheels. Who will really be in charge? In the conference call Palm said that Jon would be the execution guy and Jeff the visionary. "The combination of those two guys is one of the most dynamic... combinations on the planet." Maybe. Any organization structure can work if the people involved get along well, and I presume they would not have made this arrangement unless they were all comfortable they could work together. So good for them and best wishes.
But if you want to be a cynic, you'd speculate that Jon probably didn't leave Apple just to be the head of engineering execution at a much smaller company. You wonder if the current situation is just a stage in a longer-term changing of the guards at Palm. I don't have any evidence that's the case, and I am not trying to start any rumors. But when you see a nonstandard reporting structure like this, it usually triggers speculation that another shoe is going to drop later.
Only time will tell.
What's the effect on products? That's the most important question, and it's impossible to answer at this time. Hardware product development usually takes 18-24 months, so the earliest Jon could change the Palm road map would be very late 2008. But that's the middle of the Christmas selling season, and you can't announce products then. So realistically, the Rubinstein product era doesn't start until spring 2009.
In the meantime, there's a lot he can do to make the development of the currently-planned products be more efficient and predictable. Palm has said publicly on numerous occasions that its on-time product delivery needs to improve, and presumably Jon can help with that.
But personally, I think Palm's bigger problem has been its lack of innovative new product designs. Unless Palm has a bunch of surprise products already in development, it will take quite a while to turn around the product road map.
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Thanks to Twofones for including last week's post on the Palm Foleo in the latest Carnival of the Mobilists (link).
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