Palm's Comeback Starts With Pre, WebOSPalm's Comeback Starts With Pre, WebOS

A few years ago, Palm was the unquestioned leader in the U.S. smartphone and PDA market. But it has failed to keep deliver devices that consumers lusted after, and it has been rapidly losing customers and has posted six consecutive quarterly losses.

Palm's unveiling of its Pre smartphone and WebOS at CES on Thursday gives the company a decent shot at taking back customers who have flocked to Research In Motion's BlackBerry smartphones and Apple's iPhone 3G. The comeback trail will be tough, though, as the marketplace is wildly different from when Palm dominated it.

Once the domain of early adopters and business professionals, smartphones have now become a mainstream product. The space has strong entrenched players like RIM and Apple, and up-and-coming newcomers looking to capitalize on Google's Android operating system. To make matters worse for Palm, LG and Nokia are making hard pushes for the U.S. market as well.

The smartphone market is still somewhat divided between enterprise smartphone users and the casual user, but that line is rapidly disappearing. Palm said it wanted to go after the "fat middle" of the market between the business-centric BlackBerry and the media-centric iPhone.

"We think it's perfectly balanced," said Palm CEO Ed Colligan during the handset's unveiling. "It's not just for work, it's not just for play. ... We think it's the one phone you can use for your entire life."

In terms of design, the Pre should be an appealing device to consumers. The 3.1-inch touch screen has a sharp resolution and it has multitouch and gesture-based navigation like the iPhone. The Pre takes gesture control a step further by including an area under the screen to let users quickly perform a few actions in any application with a swipe of the finger.

There's also a slide-down physical keyboard that curves forward slightly, and it should make mobile professionals and rapid-fire text message users happy. Including the touch screen and a physical keyboard does have its price though, as the Pre is a bit thicker than Apple's smartphone and the touch-screen BlackBerry Storm. Additionally, some may be bothered that there's no on-screen virtual keyboard.

In terms of features, the Pre has nearly everything one expects from a high-end smartphone, including Wi-Fi, 3G, Bluetooth, full HTML browser, 3-megapixel camera, the ability to add applications, 8 GB of storage, multimedia capabilities, and a high-end processor from Texas Instruments. It doesn't blow the competition out of the water with its specs, but it is a highly capable smartphone that isn't out-classed by its rivals.

But most high-end smartphones share similar set of features anyways, and there's an increasingly important emphasis of the software. Palm's WebOS has been in the works in various iterations for more than four years, and the company believes that extra time allowed it to create the right OS for a modern mobile user.

Palm's WebOS has been built from the ground up with constant mobile Internet connectivity in mind. Palm's OS pulls information from various Web services and aggregates it into a single, finger-friendly interface. For example, it will be able to aggregate contact information from Microsoft's Outlook, Web-based e-mail, and social networking site into a single contact list. The Outlook integration could make this a useful device for mobile professionals, and hands-on reports said it handles multitasking well.

The company said the platform was built on industry-standard technologies like CSS, XHTML, and JavaScript, and Palm intends to offer a rich open development environment for third-party developers to quickly create content. For example, the Internet radio provider Pandora was able to create an application in three days, Palm said.

Palm was well known for its rich stable of developers for past smartphone platforms, but getting developers to create compelling programs for WebOS may be the biggest challenge because the market is getting extremely crowded. While developing apps for Palm's platform may be easy, developers are likely to go to where the largest audience is.

Right now, Apple is clearly the most attractive platform because its App Store has had more than 300 million downloads in the last six months. Developers may also be drawn to BlackBerry and Windows Mobile for their large user bases, and Google's Android platform is expected to be on multiple handsets and carriers in 2009. Additionally, many industry watchers expect Symbian to make a strong play for the U.S. market once it has gone open source in 2010, further siphoning potential content creators away from Palm.

This could potentially lead to chicken-and-egg scenario where developers ignore the WebOS platform because it doesn't have a large user base but it can't get a sizeable following because there aren't compelling apps. This shouldn't be an issue with the larger entities like Facebook which have the time and resources to create programs for multiple platforms, but it could keep out smaller developers who create niche or exclusive content.

Additionally, questions still remain on how WebOS applications will be distributed. The company will most likely take its cue from the App Store and Android Market and create a single store for users to browse, buy, download, and install apps on the go. But the company has not said if this is the case, what payment method will be used, and what percentage of revenue developers will get.

Palm has partnered with Sprint to be the exclusive carrier of the Pre at its launch in the first half of 2009, and this has positive and negative aspects. AT&T has the iPhone 3G, T-Mobile has the G1, Verizon Wireless has the BlackBerry Storm, and Sprint will likely make the Pre its flagship handset. This means the Pre will benefit from Sprint's advertising and marketing muscle, and it can take advantage of the company's large EV-DO Rev. A network. But Sprint continues to struggle with maintaining subscribers, and it still has a bit of a reputation for having poor customer service. The companies haven't released any pricing details, but it may be hard to sell the Pre for more than $199, which is what the iPhone 3G and BlackBerry Storm cost.

Palm appears to have cherry-picked popular features and services from its rivals while adding enough unique qualities to make the Pre and WebOS attractive. But there are still too many unanswered questions to say if these products will get it back to the top.