CLIP: Palm Pins Its Hopes on Nova

The smartphone maker debuts its new operating system, code-named Nova, at January's CES. Palm says its phones for it will bridge the BlackBerry-iPhone gap

By Peter Burrows

Jon Rubinstein got the call in mid-2007 while he was living on the Pacific Coast of Mexico, working on his dream house after a storied nine-year stint at Apple (AAPL). Former Apple finance chief Fred Anderson and Silicon Valley financier Roger McNamee, partners at private equity shopElevation Partners, were considering an investment in struggling smartphone maker Palm (PALM). They wanted Rubinstein, who's known informally as "Ruby," to come aboard. Having led development of products such as the iMac and the iPod that had saved Apple from oblivion, Rubinstein thought the opportunity smelled intriguingly familiar.

A few days after getting the hard sell in person from Palm Chief Executive Officer Ed Colligan, Rubinstein agreed to become Palm's executive chairman in charge of product development (Colligan would handle the business stuff). Rubinstein's rationale was that for all its problems, Palm could still manage a comeback. It boasts a well-known brand, close ties with key phone companies, and a track record of making breakthrough products like the original Palm PDA and the Treo smartphone. The company was already working on an ambitious new operating system that would be a foundation for a wide range of useful mobile tools. With the right leadership, Palm could find a niche in a critical area for tech: mobile Internet. "The next 10 years is all about the transition from notebook to mobile computing," Rubinstein says.

AIMING FOR THE "FAT MIDDLE"

Rubinstein's efforts are about to bear their first fruits. On Jan. 8 at the Consumer Electronics Show in Las Vegas, Palm is due to unveil the long-awaited operating system, code-named Nova, as well as the first of a family of products that will run on it. While Palm has protected its plans with Apple-like secrecy, Rubinstein and others say the goal is to create products that bridge the gap between Research In Motion's (RIMM) BlackBerry devices, oriented to work and e-mail, and Apple's iPhone, oriented to fun. "People's work and personal lives are melding," Colligan says, adding that Palm is aiming for the "fat middle of the market."

Palm needs to hit its mark. The company has lost share and its stock price has plummeted 80% since Rubinstein joined. With about six quarters of cash currently in the bank, Palm's last best hope may be Nova, to be released by mid-2009. Cash-strapped carriers are loath to take on the cost of supporting another platform and software developers are busy building software for other devices, including the iPhone, BlackBerry, and phones that use Google's (GOOG)Android software. "If they can't show me a large, active audience, I'm not going to be interested," says Jeff Holden, CEO of Web 2.0 company Pelago, maker of a social networking tool for the iPhone. "At this point in the game, you're toast unless you have something completely unbelievable."

Palm insiders are optimistic. "I'm fundamentally convinced we're onto something huge," says Mike Bell, a 16-year Apple engineering star who joined Palm last year. "Some of the stuff we're working on here is mind-blowing—better than anything I've seen before."

THE ALL-AROUND SMARTPHONE

Executives won't be specific about Nova, though Palm is not looking to go toe-to-toe with the iPhone or BlackBerry. The general idea is to create a platform that's flexible enough to support a wide range of customer desires. No single product can satisfy all the unmet needs of today's digital consumers, McNamee says. Today, people carry iPods, cell phones, and Amazon.com (AMZN) Kindle e-book readers. But there's no mobile-phone software that can handle complex games like those played on a Nintendo DS handheld, or let a working parent manage both corporate e-mail and family calendars.

The iPhone comes closest to handling such divergent needs, but is so packed with features that its battery power is quickly depleted, McNamee says. "Because of power limitations, nobody dominates the whole market," he says. He believes over time, the iPhone will be the device of choice for the 10% of cell-phone users interested primarily in mobile movies and other professionally produced fare. BlackBerry will remain the go-to phone for people interested in basic communications and so RIM will command greater share in the long term. What about Palm? During an interview at Elevation's offices, McNamee declines to say how much share he expects Palm to get, when Anderson pipes in, "Two percent would be just fine." With more than a billion cell phones sold each year, every point counts.

Sources say Rubinstein's team also hopes to create phones that make smarter use of data about you. For example, your smartphone could send you an e-mail the day before your next business trip, advising you on the weather conditions in your destination city.

Palm hasn't made good on any of these promises yet. But while the company has earned a reputation for missing deadlines—analysts expected a new OS a year ago—backers note that the company's engineering corps has undergone a radical makeover under Rubinstein. The company says it's hired 150 engineers since Rubinstein's arrival. Among them are Jeff Devine, a top operations executive with Nokia (NOK), and Way Ting, an operating system guru from Silicon Graphics (SGIC). "We haven't had any trouble selling our story," says consultant Dan Walker, who was Apple's chief talent officer from 2000 to 2004 and now leads recruiting for Palm...

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Palm's New Smartphone Platform Coming Jan. 8 (PALM)

Dan Frommer | December 15, 2008 10:25 AM

Palm (PALM) is on the brink: Its Treo smartphones, once leading the industry, are bulky and outdated. Upstarts like Apple (AAPL) and RIM (RIMM) have zipped past. And it's burning cash.

But that's okay! None of that will matter if its new smartphone platform, dubbed Nova and headed up by former Apple exec Jon Rubinstein, is a hit.

Palm, which has been promising to unveil the platform this year, will do so next month instead, Jan. 8 at the Consumer Electronics Show in Las Vegas.

BusinessWeek: While Palm has protected its plans with Apple-like secrecy, Rubinstein and others say the goal is to create products that bridge the gap between Research In Motion's BlackBerry devices, oriented to work and e-mail, and Apple's iPhone, oriented to fun. "People's work and personal lives are melding," [Palm CEO Ed] Colligan says, adding that Palm is aiming for the "fat middle of the market."

Won't be easy, but we won't write it off until we've seen it. Meanwhile, Palm will have to deal with at least one unknown variable on Jan. 8: The new goodies Apple's Steve Jobs will have announced just two days prior during his annual Macworld keynote.

See Also:
Palm's New Smartphone Platform DOA?
Frustrated Palm Investor Trolls BlackBerry's Facebook Page
Palm: Fall Sales Horrible, Slashing Costs

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Palm CFO Bails Ahead Of New Platform Launch

from Silicon Alley Insider by Dan Frommer

Weird timing: Just as Palm (PALM) is set to launch what's supposed to be the future of the company -- a secret smartphone platform -- its CFO is leaving. Andy Brown will leave Palm in January, to be replaced by eBay (EBAY) accounting exec Douglas Jeffries.

In a note today, Citi analyst Jim Suva writes that the change doesn't signal any accounting concerns -- Brown will sign off on Palm's 10-Q. And Suva notes that the CFO change was not related to Palm's recent surprising flop -- announcing November quarter sales missed consensus by 40%. (As it shouldn't be. Palm's problems are overwhelmingly product related.)

But like Suva, we're surprised by the timing. If Nova, the new smartphone platform, is really the future of the company, it seems a strange time to leave.

Meanwhile, in the same vein as Apple (AAPL) and Google (GOOG), Palm is releasing an App Storefor its Palm OS and Windows Mobile-based smartphones. Smart move -- installing apps on Palm smartphones used to be a pain.