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July 21, 2000

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Research in Motion

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Subject:  Palm Just died (or Palm's Latest Annc.)
Author:  cjoh

CNET Story on Palm

Gillette's model (give away the razor, make money on the blades) may help Palm beat Rim to the consumer level. Palm will be announcing a $149 palm with 2MB and a springboard expansion slot, rumor has it.

This is tough-- The Palm is about to hit a price point where it can be given away for free, as a loss leader for service providers. The question is-- at what point does a wireless device become cheap enough to manufacture and sell to give away for free in exchange for service fees?

I think that Palm has hit a brick wall with its product, to tell you the truth. Overall, the functionality of the devices has not changed all that much since they were a US-Robotics owned company. They haven't really done anything revolutionary at all since Dubinsky and Hawkins left the company.

Don't get me wrong-- they're still a threat-- PALM posted Net income 10,953M for Q1. RIMM on the other hand, posted net income of $388,000. Rim spent $10.4 Million in the first quarter, or nearly 40% of its revenue on "Selling, Marketing and Administration" and 17% of its revenue on R&D (4.5M).

That's a pretty hefty change, folks-- A huge leap in Marketing expense, and a big drop in revenue.

Now, of course, RIMM isn't close to beating out PALM in the consumer market. As far as volume is concerned, everybody's got a pilot.

Now here's the kicker, though-- those people that I have met that have balckberries (myself included) not only have a berry, but ALSO a Palm. With the pager approach, RIMM made its own space within the PDA market to squeeze itself in.

And now we have to think about Microsoft Outlook, and how it got on all the desktops of all of corporate america.

It used to be, several internet years ago, that you used Eudora for your email client, or if you were lame, Netscape. And you used something like Microsoft Schedule+ for your PIM.

The same thing is happening in the space now-- you use your Palm as your PIM, and your RIM as your email client.

Now, in a great parallel, the PIM is coming, once again, to the email client. And in a few years coming, we'll all expect our PDAs to handle both. And both well.

And, folks, the Palm is built on a non-net foundation. It cannot handle this convergence-- everything that it rests upon goes against this:

1. On when you need it, off when you don't
The Palm isn't always powered on. This means it isn't always connected. If it was always connected, it would drain the battery life outta there so fast.

2. Jot notes, don't write paragraphs
Try writing an email on your palm. Just try. Use that little keyboard. And don't give me any crap about "Palm is selling those portable keyboards like crazy" because it just doesn't matter. Those portable keyboards are huge and take up space, not in my bag, but on my airplane fold-out table.

3. Always pull, rarely push
The palm is 99.99999% a reactive device. The only thing proactive the thing does is beep when you set a reminder. That's it. It can't do anymore, or it sucks the life out of its two triple As.

The funny thing is, Palm is totally vested in its operating system which, in a wireless world, can't survive unless its totally and completely scrapped. Its power consumption is too high, and its connectivity is too low.

BUT-- it does have a bigger screen, and better applications, and more developers.

It doesn't matter in the long run, folks-- kiss palm goodbye. The 957 is just the beginning. Without the unconscious wearability of a RIM, and the ubiquitous networkability of a RIM, the Palm stands no chance against it. Its architecture has killed it, and has left the door wide open for RIM, and others to take away.

4. Single method network connectivity: web clipping. This is the deal-- you can only connect to the network through a web clipping app with Palm's infrastructure. This means that basically that the Palm's Internet offering is limited to what you can do with very basic, stripped down HTML. This leaves no room for things like instant messaging-- streaming media, or anything of the non-html connection type.

The RIMM has:

1. Always on connectivity
Its never off unless its batteries die, or you shut it off. When its on, its online. I can't wait till somebody ports apache to one of these suckers. Hah!

2. A Keyboard that you can type pretty dang fast on with your thumbs.

3. Feature-complete email functionality
You can send an email easily and quickly with no problems. You don't have to go through the plethora of steps to send an email like you do with a PalmVii (which I also own, by the way)

4. Java Java Java
You WILL be able to download applications onto the rim, wirelessly with the RIMM. Thats something you can do with the palm now with some finagling, but you can only get web clipping apps. And if you've been reading, you know the limitation of web clipping aps.

So folks, I am going to go ahead and say it: PALM has 5 years to live. My prediction is that Palm will be killed by RIMM in five years. I think that in 2.5 years, RIMM will have captured a strong portion of the PDA market, and at the end of 5 years, RIM will have the largest market share in the PDA market.

Thats ballsy, but, as a developer first, and an investor second, I can tell you that Palm does not have an architecture for the wireless world because there's more to the wireless world than the wireless web. Any company that is using this foundation is doomed, save Handspring, which may pull some rabbits out of its hat with some springboard connectivity.

Despite the war chest, Palm is built on the foundations of non-connected computing. And RIM is built to connect. Sorry PALM.


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