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Palm's Rubinstein Laments 'Wasted' Sale To HP

Palm's former CEO wishes the company had never been sold to HP.
Tablet Buying Demystified: 10 Tips
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Tablet Buying Demystified: 10 Tips
Just one year after it launched its comeback bid, Palm was in trouble all over again. Distribution deals with Verizon and Vodafone fell through at the last minute, and the Pre, its first webOS smartphone, didn't sell as well at Sprint as the company had hoped. Desperate to save itself, Palm agreed to sell the company to HP, which promised to keep it alive. It wasn't too long before HP broke its promise and killed off Palm's smartphone and tablet hardware businesses.

Palm's former CEO, Jon Rubinstein, regrets the decision to join HP. In a telling interview with Fierce Wireless, Rubinstein lays bare his thoughts on how things turned out.

"I'm not sure I would have sold the company to HP," said Rubinstein. "That's for sure. Talk about a waste. Not that I had any choice because when you sell a company you don't get to decide that. Obviously, the board and shareholders decide that. If we had known they were just going to shut it down and never really give it a chance to flourish, what would have been the point of selling the company?"

HP closed its acquisition of Palm in July 2010. It was just over one year later, in August 2011, that HP shuttered Palm's hardware business. Palm launched the webOS-based TouchPad tablet in July of that year and the device, although interesting, did not sell well.

[ Read more about Palm's demise. See WebOS Failure: Palm Insiders Blame Management. ]

The big problem was HP's change of CEOs. Former CEO Mark Hurd signed the deal with Palm, but resigned a few months later after a scandal forced him out. HP hired Leo Apotheker to replace Hurd in the fall of 2010. It was Apotheker who left Palm to die on the vine and sealed Palm's fate. It's really a shame, because Apotheker himself was ousted after about a year on the job once the board of directors realized its mistake. Even so, Apotheker's replacement, now-CEO Meg Whitman, didn't reverse Apotheker's course on Palm and webOS.

According to Rubinstein, though, it appears as if Palm's failure to negotiate distribution deals with the wireless network operators is what really sunk webOS.

"We almost had deals with Verizon and with Vodafone, and in the last minute both of those guys decided not to go through with the deal, so we had a deal with Sprint," explained Rubinstein. "It wasn't like we made a choice of, 'Oh, we're going to go with Sprint.' We were negotiating with everybody. And the Sprint deal was the best deal we could get at the time. Palm was dying when I got there. It wasn't like we had the pick of the litter. Everybody forgets that Palm was pretty much dead when we did the recapitalization. It had no future at the time."

Palm released the Pre in June 2009 and it wasn't until much later that year that other carriers began to sell webOS-based devices. In total it brought the Pre, Pre+, Pixi, Pixi+, and Veer to Sprint, Verizon, and AT&T.

One reason it had trouble with the carriers was due to is refusal to add carrier-based apps and services to its devices. So far, Apple is one of the few hardware makers that's been able to avid this pitfall. Carriers love to put their own applications and services on their smartphones, but Palm wanted none of it.

"We always argued with the carriers," said Rubinstein. "They wanted to have their specific goofy services and stuff, and they would pressure to try and support their stuff when we didn't want to. All of that stuff has gone away. No one uses that stuff anymore."

Carrier deals are essential for hardware makers. If the wireless network operators won't sell a device, it has little chance of success in the market. Look at Sony. The company can't convince most U.S. operators to sell its high-end Xperia Z smartphone. Instead, it is selling the device directly to consumers at the full retail price of $649. As good as the Xperia Z is, most people won't ever know that it exists if it isn't on the shelves of a carrier retail store.

With few carrier deals, it is no wonder that Palm struggled to sell webOS smartphones. Had the company struck better arrangements with Verizon and AT&T, and found a more committed buyer, the company might have had a better shot at gaining traction in the market.

WebOS isn't entirely dead now, but it might as well be. HP's Whitman decided to give the operating system to the open source community. It and associated developer tools can be downloaded from HP's website.

Rubinstein should feel slightly vindicated, though. Apple recently showed off iOS 7, and the new platform clearly took a page from Palm's webOS.