The forgotten story of Palm Inc

By late 2001, Palm's developer base reached 140,000, and the company's generated $1.6 billion in revenue.
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This year marks the 30th Anniversary of Palm Inc, the once-mighty, now-defunct maker of the pioneering 1990s personal digital assistants (PDAs) and smartphones. This California-based company single-handedly built the market that iPhones and Android devices dominate today.

As the company’s co-founder Donna Dubinsky tweeted, “Some days it feels like it was yesterday. But mostly, it feels like another lifetime.”

Tracing the Palm story with its soap-operaesque twists and turns is hard even by Silicon Valley standards. It started in 1992 as a small company in the handheld computing industry, was acquired by another company that then sold itself. It went public, was split in two, reunified, and sold itself off again. It lost its original team along the way but then got them back, only to bid farewell to them again. And then it died. Until 2018, when it was briefly revived and silenced all over again. Let’s deep-dive.

A star was born

Jeff Hawkins launched Palm Computing in 1992 to create software for PDAs manufactured by other companies, such as Tandy Corp’s Zoomer – the only device that rivalled Apple’s Newton. Interestingly, the company even developed an add-on handwriting-input software for the Newton-dubbed Graffiti. Jeff hired former Apple executive Dubinsky as the CEO along with Radius’ Ed Colligan as VP of marketing.

In 1995, Palm Computing Inc was acquired by Skokie, an Illinois-based US Robotics Corp. This is when they unveiled their own range of PDAs. The pen-based Pilot 1000 and Pilot 5000 were the first to hit the market in March 1996. It powered the company’s proprietary operating system. Even though it won PC Computing’s MVP Usability Achievement of the Year Award, critics noted that the initial Palm PDAs lacked keyboard functionality and messaging features.

The year 1997 was a busy one for the business, with sales coming in at over $114 million. US Robotics launched the Network HotSync technology, which allowed users to connect to desktop computers or computer networks via an optional snap-on modem. When 3Com Corp bought US Robotics in May, Palm became a division of 3Com. This was the largest US data networking merger at the time as it involved $6.6 billion in shares and produced a new business with $5 billion in sales. By the end of the year, Palm decided to provide other manufacturers licences to use the Palm OS platform.

By 1998, the company had hit $272 million in revenues and unveiled the Palm III handheld. Everything seemed perfect until Palm co-founders Jeff Hawkins and Donna Dubinski abandoned the ship as 3Com wouldn’t spin off the handheld starlet. The duo started Handspring, eventually becoming one of Palm’s main rivals. A little more than a year after Handspring began operations, it had 21% of the market. Palm’s market share decreased from 83 per cent to 63 per cent.

By the end of 1998, 3,500 devoted programmers were producing applications for the Palm OS. The demand for Palm’s products continued to grow, and they were being adopted in several new industries, such as the financial and healthcare sectors. However, Microsoft, which had released its Windows CE platform for mobile computers the year before, was stepping up the battle. Devices running Windows CE were available from a number of producers, such as Casio Computer Co., Hewlett-Packard Co., and Compaq Computer Corp.

Despite Microsoft’s presence in the market, Palm continued to do well in 1999 with new product launches such as Palm IIIx, Palm V, Palm VII, Palm IIIe, Palm Vx, and Palm IIIe Special Edition. The Palm VII was notable because it allowed users to connect wirelessly to the internet via the subscription-based wireless Internet service. Palm developed new technology known as “Web clipping” that allowed Palm VII users to visit participating websites and access the most relevant information from them. The new Palm VII also supported wireless messaging.

Revenues were approximately $563 million that year. The company also solidified a number of alliances with companies such as TRG, Sun Microsystems, Nokia, and Computer Associates International Inc.

A consolidator on steroids

In the year 2000, Palm’s revenues reached approximately $1.1 billion. They spun out of 3Com and were named to the S&P 500. Palm Inc filed its IPO in March 2000, becoming an independent company traded on the NASDAQ stock exchange.

A slew of new Palm handheld devices also appeared in the market. The majority of their utility stemmed from Palm VII’s wireless Internet connectivity. Palm entered the enterprise market in 2000 as well. It released HotSync Server software, which enabled businesses and organisations to manage handheld computers on a network level. Rather than synchronising devices to a single PC, users could do so through a server, either within the organisation at any number of terminals, from PCs remotely connected to the company’s network, or via a wireless connection. Microsoft attempted to enter this market as well in the fall of 2001.

By late 2001, Palm’s developer base had reached 140,000, generating $1.6 billion in revenue. They had a global reach, selling products in over 35 countries. According to a July 2001 market analysis and forecast from International Data Corp, Palm controlled 55.9 per cent of the global market for personal companion handheld devices. Its global market share in handheld operating systems was 71.8 per cent.

Palm purchased, which produced Internet-based calendars, for $80 million in cash and stock options to expand its wireless Internet services. It also purchased e-mail provider Actual Software Corp. Palm planned to include expansion slots in its organisers by early 2001, trailing Visor and Pocket PC devices in this area. Sony was also preparing to launch its own PDA.

In a race to develop more advanced features in a shrinking market, Palm purchased several companies to gain an edge. For example, it paid approximately $40 million to acquire wireless-synchronisation expert WeSync in late 2000. In a slowing economy, these purchases were insufficient to prevent a collapse in the handheld computer market. The company’s new m500 and m505 models were announced two months early, which did not help sales of units already on the market. Palm had to cancel a plan to acquire Boise’s Extended Systems, Inc., a wireless technology producer for the corporate market, for $264 million in stock as its share price began to fall.

Palm laid off employees for the first time in May 2001, putting a halt to a planned 11-building headquarters complex. PDA manufacturers introduced steep discounts throughout the year to keep the machines moving. This was when Palm was forced to deal with the familiar threat posed by Handspring and Microsoft alongside emerging players like Blackberry, who were making a lot of noise.

As such, Palm paid $11 million in stock for former Apple executive Jean-Louis Gassee’s Be operating system in 2001 and split it into two business units: hardware and software. The company’s software division, PalmSource, took control of the Palm brand in August 2002 and relocated to its headquarters. Palm Solutions Group, the hardware division, quickly evolved into two distinct product lines: the high-end Tungsten brand for professionals and the Zire brand for new users and students. Palm also attempted to expand its corporate presence by providing features such as wireless database access and high security.

A rollercoaster of a Decade

In June 2003, Palm, Inc. announced it was purchasing rival Handspring in a stock swap (worth $240 million when the deal closed in October). In October 2003, Palm, Inc. spun off PalmSource, its software unit, while the original company, which retained the hardware operations, was renamed PalmOne, Inc.

PalmOne still led the traditional PDA market with a 40 per cent share, while Handspring had become a niche player in the emerging “smartphone” market, which was exploding. PalmOne was renamed Palm, Inc. in July 2005 after it bought the remaining rights to use the Palm name for $30 million.

Palm introduced its Life Drive line, which featured four gigabyte hard drives, in the spring of 2005. This was the company’s first attempt to create a larger, all-encompassing mobile manager system designed to meet all of your requirements. To speak of it now, with its contacts, calendar, music, images, video, applications, 4GB of microdrive HDD storage, Bluetooth and Wi-Fi, and all the software from the Palm OS, it doesn’t sound too dissimilar to modern smartphones and appears to be a good idea. It even had a switch to toggle between portrait and landscape mode. The problem was that all of this made it a very large and expensive device at the time. Production ceased less than two years into the cycle, not long before others came up with a similar but more refined idea.

In September, it announced a new range of Treo devices (previously developed by Handspring and offered under the palmOne brand) with Microsoft’s operating system to help stave off competition from Blackberry. Unfortunately, like Life Drive, this product was discontinued in just four years. The same fate was seen with Palm’s first and only laptops, Foleo, Centro, Pre, and Pixi.

The Final Chapter

Palm sold itself to HP for $1.2 billion after losing all hope in 2010. The computing behemoth stated that it intends to release phones, tablets, PCs, and other products based on WebOS. (Under the HP brand, it discontinues Palm.) But then HP fired Mark Hurd, the CEO responsible for the deal. In 2011, the company launched the TouchPad, a potential iPad killer, under new CEO Léo Apotheker. However, it closed the WebOS business seven weeks later.

Fast forward to 2018, a new startup backed by TCL and Golden State Warrior Stephen Curry adopted the Palm brand for a tiny Android-powered device designed for use when you’re working out. And that was the last time we ever heard of the brand.

In Palm’s history, every business decision taken after the first chapter was too little, too late. They gave Sprint an exclusive deal to sell the Pre and Pixi and continued it when there were no sales. Palm neither let developers build WebOS apps or an equivalent of the iPod touch. Palm never marketed Pre in a way that mattered while iPhone, BlackBerry, and Android devices blew the roof. Given how things went, even their investors began publicly trashing the company.

Ironically, Palm’s biggest competition, BlackBerry, followed the same downward spiral. The company began collapsing in 2013 due to a 40 per cent plunge in sales, leading to its shares tumbling down by nearly 17%. The company fired 4,500 employees and recorded an inventory write-down of nearly $960 million for that fiscal second quarter of that year. However, unlike Palm, they had no prospects for a last-minute exit. On January 4, 2022, BlackBerry’s once-famous messaging service was completely defunct.

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Sri Krishna
Sri Krishna is a technology enthusiast with a professional background in journalism. He believes in writing on subjects that evoke a thought process towards a better world. When not writing, he indulges his passion for automobiles and poetry.

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