I have posted this week’s 1SRC editoral, Sidelining for Success.

In an editorial last week Brighthand Editor-in-Chief Ed Hardy wrote that Palm will not be releasing a Palm TX2 handheld, or any other PDAs, anytime soon. I know that customers who prefer having a stand alone device won’t be happy about this news. Taking a longer view of what this development means, I feel, gives you a better idea of what is going on at Palm and why there won’t be a TX2 coming in 2008.

The Palm TX2 isn’t the first device that we have learned won’t be shipping. Earlier this year, the Palm Foleo was announced (May, 2007) and then later canceled (September, 2007). The rumored Treo 770, which included a leaked, marked up user guide, also never materialized this year. If here is demand for these devices, and I really do believe that the Foleo answers a need for mobile professionals, why aren’t they making it to market?

There are two reasons why I believe that these devices are being taken off the drawing board and being put on the shelf. The first is that Palm’s management team has had a dickens of a time executing on their long-term goals to deliver products. Palm executives have already admitted that the company has had trouble with execution. The second is that there are some new corporate owners in town and they are reprioritizing Palm’s internal product roadmap.

I was listening to the Business Week Cover Stories podcast, specifically a show called “Perform or Perish” with John Byrne and Emily Thornton. The two talked about an article that appeared in a late October print issue of Business Week in which the magazine took a look at what happens to companies when they are taken over by private equity firms. The Business Week podcast caught my interest because Palm recently agreed to give up a 25% stake in the company to private equity firm Elevation Partners. The article focuses on the intense pressure put on the CEO and management team to drive down operating costs and increase profitability. It is a high stress environment for sure; however, the rewards can be equally great.

“So how does this all fit in with Palm?” you might be asking yourself. Palm’s greatest asset is their ability to differentiate their products from all of the other devices on the market with their software. The problem is that on the Palm OS side it is becoming increasingly more difficult to differentiate due to the age of the underlying foundation of the operating system. How can they leverage their software, drive down costs, and increase profitability? I think we already have the answers.

I suspect that the new management team at Palm has re-evaluated the internal product roadmap. Palm CEO Ed Colligan has stated that he had been working with Jon Rubinsein on a consulting basis prior to his joining Palm as the Executive Chairman of the Board at the close of the Palm/Elevation transaction. With the number of products that haven’t been released this year, three by my count, I suspect that any project that does not directly relate to the development of Palm OS II or the next generation Treo are being set aside for the time being. Make no mistake; Palm OS II is a high priority project for Palm and they need to deliver the new Linux OS on a redesigned Treo within the next year. Palm is looking to reduce costs by using a common hardware architecture that is expected to provide the company with the ability to leverage a lower bill or materials costs and accelerate the product delivery cycle. If Palm is able to execute on their plans to develop a new Palm OS, a redesigned Treo, and lower costs, the company can achieve the increased profitability I talked about earlier. With the distractions of non-essential products out of the way, Palm will be able to better focus on the items that are important to the company long term. And sometimes this means that products need to be canceled or postponed as was likely the case with the Foleo.

In Conclusion

Palm will have its work cut out for the 2008 calendar year. Investors, analysts, and customers will be watching the company to see if the new management team will be able to execute to drive to product delivery for early 2009. Palm isn’t a company without ideas; it is just one that needs help getting those ideas from the drawing board and into people’s hands. Palm has a long history in the mobile computing space and with the right resources in place; they can design easy to use products that help customers meet the needs of their personal and professional lives.

[Via 1SRC.com…]