Palm: The End of a Long and Troubled Road

I was delighted back in the spring of 2010 when Hewlett-Packard announced it was buying Palm. I’ve been a fan of Palm for 15 years, but throughout its history, the company has always been hamstrung by a lack of adequate financial resources. With mighty HP behind it,  Palm could finally reach its destiny.

I couldn’t imagine that 20 months later, after wasting more than $3 billion, HP would put Palm’s sole remaining asset, the webOS operating system, out at the curb with a “Free to a Good Home” sign around its neck. (I’m sorry, I simply cannot credit HP CEO Meg Whitman’s claim in an interview with The Verge’s Joshua Topolsky that we’d eventually see new HP tablets and smartphones powered by webOS.  If HP meant that, it  wouldn’t have let the webOS team scatter to the winds.)

But if it’s a sad end to the Palm line, it is somehow a fitting one. Palm always  was a company that couldn’t buy a break.

Palm’s  troubles started at the very beginning. Having failed to raise venture capital funding to get the original Palm Pilot manufactured and marketed, founders Donna Dubinsky, Jeff Hawkins, and Ed Colligan had to sell the company to modem maker U.S. Robotics in 1996. Almost immediately, U.S. Robotics turned around and sold itself to 3Com. It’s not clear that 3Com was more than dimly aware that Palm was part of the deal. It certainly clear that 3Com never had any idea of what to do with it.

Palm was forced to stop using the Palm Pilot brand in a trademark dispute with the Pilot Pen Co.

After founders Dubinsky, Hawkins, and Colligan left in a dispute over strategy, 3Com spun Palm into two companies, PalmOne, which made PDA hardware, and PalmSource, which owned the operating system. The goal was to license Palm software to third parties, but the only really significant licensee it signed was Handspring, the company started by Dubinsky, et. al. PalmOne (which later renamed itself Palm) struggled with constant management turmoil, while PalmSource struggled, mostly without luck, to modernize Palm’s increasingly creaky operating system.

Meanwhile, the crew at Handspring managed to turn the Palm into the first real smartphone, the Treo.  Eventually, in a bity of financial judo, Handspring merged with Palm and the company regains the right to develop its own OS, which by then had been sold to Access, a japanese software company.

Alas, it was really too late. Money was as short as ever and drastic action was needed to save the Palm OS from hopeless obsolence (by this point, Palm was becoming largely an OEM of Windows Mobile phones.)  In 2008, Palm got a $100 million infusion from Roger McNamee’s Silver Lake Partners and former  Apple hardware guru Jon Rubenstein came aboard, eventually as CEO. The new team produced webOS and got it into the Palm Pre, but the hardware never won the accolades the software earned. It was a modest success at best and the money drain continued.

The HP acquisition was supposed to change Palm’s fortunes for good, but of course we know how that turned out. But given the soap opera history, the ending should hardly be a surprise.