Palm Gets a Needed Christmas Present - InformationWeek

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12/29/2008
06:56 AM
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Palm Gets a Needed Christmas Present

Struggling to maintain a leading position in the smartphone space, Palm received a much needed cash infusion. Once a leader in this space, the company has recently struggled to remain relevant as high profile companies entered this space. In response, Palm has staked its future on its new Nova operating system, and the money could be used to help promote it.

Struggling to maintain a leading position in the smartphone space, Palm received a much needed cash infusion. Once a leader in this space, the company has recently struggled to remain relevant as high profile companies entered this space. In response, Palm has staked its future on its new Nova operating system, and the money could be used to help promote it.Palm helped to define the smartphone market with its Palm OS. However, the company has struggled to adapt to recent market changes. Several years ago, the firm split off its hardware and software businesses into separate entities, but that move has not paid the dividends expected. Palm still has marshaled a decent base of customers who have been enamored with their Treo smartphones. However, the company has not had as much success enticing third parties to support its products. In fact, the vendor has struggled to have US carriers embrace its Palms high end Treo Pro.

Consequently, the company has been losing market share. Palm now trails suppliers, such as Apple, Nokia, and Research in Motion in sales. The market changes have hit Palms bottom line: the company has posted six successive quarterly losses. As a result, questions have been raised about vendors long term viability.

Elevation Partners has been trying to help Palm navigate the turbulent smartphone waters. The private equity firm invested $325 million in Palm in October 2007 and has now pledged another $100 million in capital for the cell phone supplier. While few details have emerged about the Nova operating system, Palm is expected to start shipping the device in the first half of 2009. Flush with cash, Palm may try to create a buzz around the device and divert attention away from recent hits: Apples iPhone and Googles Android system.

Since Palm has been in business since the inception of the smartphone market, a number of small and medium businesses rely on its system. With competition intensifying, the companys future has been in question. The cash infusion should help the vendor for the short term, but its future revolves around the success or failure of its Nova system, something that should become evident in the new year.

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