The Pre: Palm savior or just another cell phone?

This weekend, Palm and its wireless partner Sprint will make the Pre mobile phone available to subscribers in the US (Palm product site here; Sprint page here). The phone was first publicly discussed back in January at the Consumer Electronics Show (CES) in Las Vegas, and it has generated tremendous interest with the technology media and in the community of interested technophiles due to its advanced interface, new operating system (called webOS), and industrial design (a touch screen with a slide out keyboard from the bottom of the device, not the side, like many competitors). While average US consumers may not have heard of the Pre, anyone plugged into the tech industry could not have avoided discussion of its design merits, its capabilities, and its potential for success, especially versus competing products from Apple (the iPhone) and RIM (BlackBerry phones).

Into the (iPhone) breach

There is no doubt that the Pre, which many directly compare to the very successful iPhone (now officially called the iPhone 3G), is being deliberately launched just a few days before Apple's own developer conference in order to generate as much mind and market share as possible before the expected Apple PR tsunami takes off (expectations are high that Apple will officially release the latest, enhanced version of the phone's operating system, iPhone OS 3.0, as well as new models of the phone with new features and perhaps lower price points). Whether this strategy will be proven correct will depend on whether the Pre has a successful launch, whether Palm can nurture positive buzz from the launch and from the product in the wild, and, most importantly, whether Apple's latest offerings and enhancements are enticing enough to overwhelm the market and media.

But the Pre is not just an interesting new phone for gadget lovers to discuss. For Palm, it is the product that will make or break the company. The company, once riding high on the success of its market-leading Palm Pilot brand of personal digital assistants (PDAs), has been struggling to stay viable. Its previous cell phone offerings, the Treo and Centro lines, were not enabling the company to making a profit. For example, Palm's third quarter results (reported March 19; read the release here) were dismal: Quarterly revenue was down to $90.6 million from $312.1 million a year ago; "net loss to applicable to common shareholders" rose to $98 million, up from $57 million a year ago; and its phone shipments plummeted 42% (year over year). Without a successful Pre launch and sustained growth driven by the new phone, Palm is in danger of disappearing (most likely through a fireside sale; ironically, a successful launch could also lead to an acquisition, but on much more positive terms).

Why the excitement? A chance to beat Apple, a great phone, or both?

So what is so exciting about the Pre? How is a single phone model potentially capable of saving a floundering company? For many media, tech pundits, and those interested in technology (not just cell phones), the Pre is first and foremost considered to be the most credible alternative to Apple's iPhone. Other companies, most notably RIM with its BlackBerry Storm, have been trying to steal some of the publicity that Apple's flashy phone has attracted since its release in the summer of 2007. But while endless online debates -- rational and of the flame and fanboy variety -- continue about whether the iPhone is innovative, whether other phones are better, and whether many other smart phones had features the iPhone still lacks, the reality is that fair or not, Apple and its first entrant into the mobile market is a smart phone PR and sales juggernaut.

No matter what vendor, phone, or carrier one is personally or contractually attached to, the iPhone is the current king. The Pre, some hope, might just do what both the Google OS-powered (Android) HTC Dream/T-Mobile G1 and the Storm failed to do last fall -- dethrone the king. For many vocal Pre supporters in the tech peanut gallery, feverishly commenting on sites like Engadget or Slashdot, defeating Apple is almost more important than the actual merits of the Pre as a phone. But not many consumers are so rabidly anti-Apple that they would sign up for a two-year phone contract just to make a point. Most potential Pre users are excited by what the phone will offer, including:

• A unique physical design. The Pre is a sleek looking phone that offers something an iPhone does not -- a slide-out QWERTY keyboard (translation: a small keyboard with dedicated letter keys that resembles the traditional layout of a computer keyboard). The HTC Dream also offers both a touchscreen and a keyboard, and there are many other slide out keyboard phones (e.g., the LG EnV series), but the Pre stands out from the crowd in that its keyboard slides out from the bottom of the phone, not the side. This design, more than almost anything else, is what makes the Pre so intriguing.
  
  Note: That while the Pre offers a physical QWERTY keyboard, it will not offer an onscreen, virtual keyboard at launch, though that can most likely be added later with a software update.
  
  
• Interface and included apps. Many Pre proponents point to the phone's interface -- in particular, the use of the novel "card" metaphor for switching between applications and functions -- as being as important to the device's appeal as its industrial design, saying it compares to or is better than the acclaimed interface of the iPhone. But emotional arguments about which device's interface is better don't really matter. Apple and Microsoft fans have been slugging it out on that topic for years with no resolution, though the market has decided that Microsoft's Windows interface is, if not better, adequate. But a pleasing interface can help sustain interest in the device in terms of both the media and consumers, so the fact that the Pre and iPhone are in direct competition for the title of the best-looking interface is an extremely positive development for Palm.
  
  In addition to the overall interface, the Pre has been lauded by many reviewers (and those watching pre-release video demonstrations) for having well-designed, built-in applications. These include the Web browser, calendar, and the various messaging solutions. Interestingly, all of these app interfaces are enabled by a core browser capability enabled by WebKit, an open source browser rendering engine that was originally developed by Apple (using code from KDE).
  
  
• Other features and capabilities. Over its brief history, the iPhone has often been knocked in the tech media for what it didn't have, including a "real" software development kit (SDK) at launch and, to this day, copy & paste functionality (added in the iPhone OS 3.0 beta). While the Pre design team had the luxury of seeing what has worked for Apple and other vendors, it was under pressure to get the phone out, so it could not implement every feature or deliver on every capability at launch. For example, the Pre SDK, called Mojo (see the developer site here), is still not widely available, and, as a result, the phone's online application store (called the App Catalog) has few offerings (compare that to the iPhone App Store that Apple last reported had 35,000 applications, with over one billion downloaded; see this release).
  
  The most prominent technical feature touted by pro-Pre people is the ability for third-party application multitasking (e.g., being able to run two or more apps at the same time). The iPhone OS can multitask, but Apple has severely restricted this capability on purpose to conserve battery life, so far only allowing its own apps to take advantage of it. How many users will care about multitasking is a matter of debate -- e.g., reading email while listing to Pandora music streams may not be of interest to the majority of users -- but it still allows Palm and its supporters to brag about a capability the iPhone does not offer.
  
  Another positive about the Pre which sets it apart from the iPhone is that the Pre has a removable battery. While not all users may invest in a second battery, the option to do so allows Palm and its supporters once again claim superiority to the iPhone.
  
  Note: There are some things the Pre does not do or have that are not mentioned often in online debates. For example, a much touted feature of the iPhone is Visual Voicemail, which will not be a feature of the Pre at launch. Also, even after the Mojo SDK is available, it will not allow the same type of development that the Apple SDK does. Mojo relies on Web standard technology, such as HTML, CSS, and Javascript, to create applications, while Apple allows programmers to write more traditional code. Why does this matter? It remains to be seen how Palm will enable developers to create graphic-intensive applications, such as complex games, for the device.

What users will really care about

While supporters of particular products and brands often tout esoteric features and capabilities that average consumers could care less about (e.g., multitasking), there are some aspects of a phone that are sure to determine the overall success of the Pre (the order of this list is on purpose, but each consumer will re-order depending on their needs, situation, or likes).

• Phone quality, physical design, ease of use, reliability, and battery life. The design of the Pre seems to be a winner in regards to the ergonomics of the phone and the interface. The reliability of the device and the impact of multitasking on battery life are not known yet. As long as there are no major issues in this area, the Pre should easily pass this first, critical test. That doesn't mean that consumers will choose the phone over an iPhone, Storm, or some future Android-powered device, but it does mean that the Pre should be high on the list of possible phones. However, that list dramatically changes given the following criteria.
  
  
• Cost of the device and the service. The Pre is $199 after a mail-in rebate, making it the same cost as the current low-end (8 GB) iPhone 3G and the BlackBerry Storm. However, the lower, subsidized cost of almost any new smart phone requires a new two-year commitment to a carrier, and the Pre is no different. Potential buyers need to then compare the voice and data plans of the wireless providers. For these types of devices, unlimited data plans are essential, as easy-to-use and useful Web browsing; simple connectivity to sites such as Twitter, Google Maps, and Facebook; and the ability to buy and download content (music, apps, etc.) over-the-air dramatically drives up data usage. So far, Sprint appears to offer somewhat of a better all-you-can-eat plan for the Pre, but the upcoming Apple developer conference may also be used as a platform for AT&T to match or beat Sprint's price points and plan features.
  
  
• The available carriers. As mentioned, the Pre is only going to be available at its US launch as part of the Sprint network. How long this exclusivity will last is unknown, as we heard conflicting statements from Verizon and Sprint executives this week. The iPhone is now -- and has only ever been -- available in the US on AT&T's wireless network, although there has been speculation recently that the exclusive deal between the two companies may come to an end soon. For many smart phone buyers, whether they are interested in a Pre, iPhone, Storm, or G1, the first hurdle to overcome is the tight link to a specific carrier. For example, Verizon customers can't buy a Pre or an iPhone, but they can get a Storm. Unless a consumer (or company) is willing to switch carriers -- either by paying the fee for breaking a contract or waiting for their existing contract to expire -- much of the debate about the Pre or any new smart phone is irrelevant.
  
  
• Additional applications. Smart -- and "dumb" -- phones have had third-party applications for years. But it was not until the iPhone App Store, driven by the first real iPhone SDK, that the concept of a third-party application clearinghouse exploded. Microsoft (Windows Mobile), Symbian, and Palm and their supporters may argue that Apple's App Store was not original, but they cannot argue that it is not wildly successful, whether offering free services, 99 cent fart apps, $9.99 games, or more expensive business tools. In fact, now it is impossible not to create an application store and related infrastructure to support a smart phone. And failure to entice developers to create applications will become a major factor in influencing the media and public perception of whether a phone or phone family is a success.
  
  
• Brand. Sometimes it is better to just avoid the constant flame wars on the technology -related community sites, blogs, and media properties. But brand loyalty -- and brand hatred -- is critical for the success of new products. The vocal minority of online commenters and blog writers that love or hate Apple, Google, Microsoft, or Palm continuously battle for their preferred brands and against those they do not like. And let's not forget that it is almost impossible to understand the motivations of these people. For example, they might by obsessed fans of a brand. They might have had a faulty product and forever put down the manufacturer. Maybe they just hate anything too popular. And, of course, it's possible they are employees of one of the product companies or paid PR reps (astroturffers). In the end, this complex and fluid mix of praise and derision is hard to control, but it must be influenced, as it will impact, if not determine the fate of products like the Pre.

The Pre outlook: Strong product, but huge uphill battle

Palm has done a tremendous job with the Pre. Ironically, Apple should receive a lot of the credit. The driving force behind the Pre was a former Apple employee -- Jon Rubinstein (Palm bio here) -- who helped with the original, company-rejuvenating iMac and was integral to the creation of the market-dominating iPod. And, as mentioned, WebKit, the rendering engine that Apple open sourced, is fundamental to the Pre and its interface and applications. But simply learning and leveraging from Apple is not enough. The Pre shows that Palm is willing and capable of delivering innovative technology. But with its launch out of the way, Palm has many hurdles to overcome to succeed in the long run, including:

• Sustaining the PR momentum. The launch is generating a lot of buzz, but once the product is out it has to compete in the marketplace where consumers commit dollars and display their brand loyalty each time they use a device. Increasing sales, ensuring adequate product supply, growing the App Catalog, and fending off the iPhone refresh are just some of the things that most go right to succeed. Creating a viable and growing Pre ecosystem -- one in which accessory makers help market the product -- will also be important.
  
  
• Ensuring device quality and the user experience is and remains top notch. Palm must make sure timely patches and software enhancements are delivered and hopefully avoid major device problems. As the underdog, the Pre will get some breaks with pundits and supporters, but the larger consumer market won't care about its David and Goliath struggle against Apple and RIM. They will want a phone that works, that is enjoyable to use, and that is satisfying to own.
  
  
• Living with Sprint. One of the benefits Apple received with its multi-year, exclusive deal with AT&T was ensuring Visual Voicemail functioned and that the App Store was enabled (a major mental mind shift for carrier executives used to controlling every aspect of the phone). It's unclear just what Sprint offers Palm. Certainly, partnering with Verizon would have made more sense, but Palm was not in a position of power given its market weakness. Now, and for what appears at least until the end of the year, if not longer, Palm's fortunes will be tied to Sprint. Will customers switch to Sprint because of the Pre, as many switched to At&T because of the iPhone? It will be hard to control, but Palm needs to make sure its US partner doesn't detract from the phone with poor customer support or other negative behavior.
  
  
• Courting developers. The Mojo SDK is still not widely available. And as for developers, Apple has a huge lead with reportedly over 17 million iPhone and 13 million iPod touch users as of April (both leverage the App Store). Palm not only has to attract new developers to the Pre, but it also has to heal some wounds with the developer community, some of whom felt abandoned by the company as its PDA business fell apart. In the new numbers game, to be seen as a viable rival to Apple, Palm will not only have to show growth in product sales, but also third-party app growth, and app download numbers. That means it's time to focus on developers, developers, developers.
  
  
• Finding a Pre niche. RIM has the corporate email angle sewn up. Apple is the master of consumer marketing. Google appeals to open source advocates. Samsung, LG, and Nokia offer interesting phones that appeal to many non-smart phone gadget lovers. But what about Palm and the Pre brand? If it is trying to take on Apple, even with its Apple alumni and and mindset, it will be impossible to generate that type of brand loyalty in the short-term and with only one product. But for now, and for better or worse, the Pre is an iPhone killer wannabe. To succeed in the long run, it needs to be more. Just ask Microsoft and the executives that manage the Zune.
  
  
• Designing Pre 2 and/or product extensions. What will Palm do to revise the Pre? Apple has kept the basic form of the iPhone intact since launch, enhancing its hardware and software to improve the phone and user experience. But Apple has an advantage the Pre probably can't or won't match -- the ability to market the iPod touch. It looks almost exactly like the iPhone and runs almost all the same applications. It makes the combined iPhone/iPod touch platform much larger, further attracting developers and garnering more media coverage. But the industrial design of the Pre -- touted as one of its advantages -- actually is a liability in this case. Its smaller size means its screen is smaller (see figure), and its SDK is not game-friendly at this point.
  
  For Pre to really take on the iPhone OS family, the company would need to move beyond a single, phone-centric device. It would need a device more computer-centric in design, like the iPhone. If not, the Pre will compete as a phone only and cannot ever hope to match Apple's multi-device success. But once the Pre breaks its initial design mold, suddenly a lot of the reason for its popularity may be diluted. Sure, a family of webOS devices with an excellent interface may find buyers, but the diversity may hurt branding efforts of the lead product. And it is simply unlikely that Palm could manage such an extended family. Damned if they do, damned if they don't.
  
  
• Fend off imitators. Apple and its supporters like to claim that everyone copies Apple products. But like Apple, Palm will soon have competition that imitates the very features and design that make it stand out today. The vertical slide keyboard? Easy to duplicate. The basic concept of interface cards? Simple to mimic. As the company will learn in a few days (the Apple developer conference) and the next six months, imitators will be more than happy to learn and steal from the Pre. As with any technology leader, the only response is either litigation, which so far hasn't stopped Apple clones, and continuous enhancement and innovation. For Palm, staying even or ahead of a revitalized Apple, Android makers, RIM, Microsoft, Sybian, and others will be just another huge to do.

Is the Pre an iPhone killer? No. Nothing is likely to kill the iPhone, with its massive market momentum, for years. Will it redefine the smart phone market? No. But it will advance the quality and design of devices and software. Is it doomed? No. Even if it fails to keep Palm afloat, the positive review of the phone will ensure that a larger vendor acquires the company and the device development team.

The Palm team did a great job getting the device to market, but now the hard work has just begun.

By: Tom Rhinelander