Palm Inc. Case

Palm was the first successful company in producing hand held devices. The Palm Pilot was the first properly good working PDA entering the market. Soon, after the first Palm PDA was launched, all the biggest and most powerful companies producing phones and PCs tried to compete in this market gap, following the trend of developing a unique device that integrates different features from both segments. So the small device market has seen the entrance of companies like Microsoft, Sony (for the hand held PC segment), Nokia, Motorola and Ericsson (for the enhanced phone segment) that more and more gained market share. The forecasted future scenario was clear: a convergence between computer and phones with a really high growing demand going on. Palm has been assisting this threatening growth without developing some differentiation source from its unique resources and capabilities (it is fair to expect something more from the first hand held device developer in the market). The response of Palm top management to this scenario was licensing the software to other hardware producer in order to stimulate the creation of a network effects, followed by an important internal restructuring. In fact they started a spin-off project that aimed to separate the software division and the hardware division; this process was completely done in 2003, when two different companies were created: PalmSuorce (software division) and PalmOne (hand held device producer division). The reason to separate definitely the two department was to better capture value and clients throughout licensing the software, capitalizing its dominant position; before the spin-off, in fact, most of the competitors on the hardware market obviously didn’t want to buy the software from Palm Inc. This operation was relatively successful and managed to acquire 22,5% of market share in 2004. On the other side, the hardware division were not enjoying its position: as already stated, lots of strong players were entering the market with products absolutely better than Palm’ ones. In 2003 PalmOne acquire HandSpring, its likewise struggling competitors. Soon they launched Treo, a smartphone that enjoyed a moderate success, but never became a leader in the market. In 2005 PalmSuorce bought all the rights for Palm from PalmOne and the company named back to Palm Inc. In the following years they tried to develop some new product, without achieving any results, in 2008 Treo design was 7 years old and it was almost the only quite Palm successful product still in the market; by the end of the year they announced that they would no longer develop any new hand held PDA. The forward focus for Palm would be software development. So in 2009 they launched PalmWebOs, a brand new software which was widely appraised, but had some different problems: mainly it was not so compatible with the previous Palm software applications and result in a pretty much close operative system. For these reasons did not sell as expected