Technology

Palm's Fading Lifeline


Its new Centro is nicely priced, but the PDA pioneer's outmoded OS is on borrowed time

Could the Palm Centro spell salvation for the struggling smartphone innovator that has fallen on tough times? Or is it a doomed effort to hang on in an increasingly competitive market? Palm (PALM) designed the Centro to attract buyers who are younger and less affluent than its traditional Treo customers, and the new phone will probably succeed in buying Palm some time. But it may not be enough to reverse the company's flagging fortunes.

The Centro is essentially a shrunken version of the Treo 755p, with a scrunched keyboard, a slightly smaller screen, and a battery yielding about 13% less talk time. Among these compromises, the only one that worries me is the keyboard, which seems to be designed for hobbits.

Centro's Positives and Negatives

The problem is less the size of the keys than how close they are together and the fact that they are laid out in straight rows instead of the more natural "smile" configuration that has become standard. As if in recognition of the problem, Palm arranged for the "mail" button to call up a text messaging program—designed for very short exchanges— instead of full-blown e-mail, as on Treos.

Centro's big selling point is its price: as low as $100, after rebates, with a two-year voice and data contract. The 755p costs $250 after rebates.

There is a big downside, one the Centro shares with its Treo siblings. The Palm OS software, which was revolutionary in its day, has been upgraded over the years with the tech equivalent of rubber bands and chewing gum. The program, which actually predates smartphones, has now gone five years without a major overhaul. Simply put, it is no longer up to the job.

Palm's Software Problem

One major problem is that the software can do only one thing at a time. This helps explain why, at a time when built-in Wi-Fi and GPS navigation are becoming standard smartphone features, Palm's products offer neither. The Web browser is barely usable, and every online Palm forum is filled with complaints from owners whose Treos crash or lock up frequently.

The sad tale of how Palm got into such a pickle is too complicated for this column. But the company made its own problems much worse by devoting scarce resources to the development of a laptop-like Treo "companion" called Foleo. The project was killed in September, just a couple of weeks before the expected launch. Partly as a consequence, Palm now says a new version of its software, based on the solid and modern Linux operating system, will not be available until the end of next year.

Why does this matter? Because for all its faults, Palm still offers the simplest and most intuitive user interface and the best integration between PDA and phone functions of any smartphone. That includes Apple's (AAPL) iPhone, which has a great Web browser but lacks a simple way to look up contacts. The disappearance of Palm OS phones would be a real loss. In the end, however, a great user interface does consumers no good if its underlying platform is unsound.

BlackBerry: A Formidable Challenge

The competition hasn't been similarly hobbled. Research In Motion (RIMM) is turning out excellent new BlackBerrys (BusinessWeek, 10/11/07) at a rapid clip. Microsoft (MSFT) has greatly improved the usability of Windows Mobile, and at least one and maybe two new versions are due before Palm finishes its Linux effort. And, of course, the iPhone is a bigger threat at its new $399 price.

All of which means Palm's options are disappearing. The company also makes Treos that run Windows Mobile, but they seem clunky next to handsets from nimbler competitors such as Samsung (SSNGY) and, especially, HTC, the Taiwan-based maker of such innovative phones as the new AT&T Tilt (ATT).

I've carried a Palm of one sort or another since the original Pilot in 1996, and I would be greatly saddened by the death of this icon. But the Centro may not be enough of an advance to prevent that.

Wildstrom is Technology You columnist for BusinessWeek. You can contact him at techandyou@businessweek.com .

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