A few days ago I wrote Apple to Spank Palm Again where I speculated that Palm would do better than Apple in the cell phone market.
I think I made the mistake of assuming that Apple doesn’t realize what the game is that’s afoot. They’re smarter than that.
The Economist has a piece about Apple’s learning from its failures. It inspired me to consider that Apple might be learning from a big failure before it even happens – they signed up with AT&T (nee Cingular) for a 5-year exclusive. They have to realize that cellular customers have plenty of reasons not to switch over to AT&T and I think they’re probably well aware of that and OK with it. They needed Cingular to be in love with the iPod and give Apple the latitude to do whatever it wanted, including changing their network, so that the iPhone could be a real mobile computing platform. Things like visual voicemail and probably other features interact with the network in a way only previously available to Internet-connected phones, the coverage of which is hardly pervasive. Yeah, I can do Visual Voicemail on my Treo with a web browser and Asterisk – but then I’m limited to using it where I can pick up a Verizon tower with 1xRTT data services. Plain-old-voicemail is clunky and works everywhere.
But now that the hype machine is in overdrive on the iPhone shareholders of the companies that passed on the iPhone are no doubt ready to hang the current leadership there. Fortunately they have a savior on the horizon – the Palm phone that I referenced in the previous article – and, by golly, after Apple has sold 3 million iPhones over the weekend they’re going to give Palm any hooks into the network they need to avoid losing their golden parachutes.
OK, so what was the topic of this article again? Oh, right, Apple. Now, back to Palm. So Palm got a massive infusion of cash and Elevation Partners, its investor, set up Jon Rubenstein, former Apple Senior VP of iPod, as Chief XYZ at Palm. Have a look at who is running Elevation Partners – many former Apple folks. Fred Anderson is the guy who took the fall for Apple’s accounting problems with the SEC. Bono, buddy to Steve Jobs, is on the investment team. Is Elevation Partners Apple’s BayStar Capital or In-Q-Tel?
If so, why would Apple want to prop up Palm?
The Networks.
Palm has existing agreements with all of the other major networks. Palm is busy working on a new phone that will run on these networks, built on XScale (like the iPhone) and built on a portable unix (like the iPhone).
Now, say Apple snatched up Palm. It could be said to be about consolidating competition against Microsoft or Symbian. Or about gaining CDMA experience. Or even bringing home the prodigal son. But it would be about the network agreements.
So, Apple can’t very well go break their AT&T contracts and bring the iPhone over to the other networks so blatantly. But it wouldn’t make sense to maintain two completely different but very similar products. Over the next five years there can be made commonalties shared. I often wondered why the iPod, so named because MP3 playback was just one application for the device, didn’t get promoted to ‘iPod Mobile’ status, and instead we got an iPhone, obviously an iPod but without its name (and getting so pedestrian a name at that). The new Palm phone can remain a separate product but gain iPod features. The PalmOS compatibility will remain, but be deprecated for future work. If we do see YellowBox for Linux next week this will be why – so Palm Phone developers can get a new modern toolbox, compatible with the iPhone. I expect that’s for next year, though, not next week, but heck that would be a neat surprise. While the two devices live on ‘independently’, developers can write-once deploy-many to Palm and iPhone devices and five years from June 29th the two products can converge – PalmOS 5 will be gone.
Once the new Palm Phone is available on all of the networks, for real, and feature-complete (network engineering), that’s when Apple can do an acquistion, not before.
There’s one potential problems with this theory. Fred Anderson took some jabs at Steve Jobs when he left Apple. This may have been real animus, it may have been a CYA action, or it may have even been misdirection. We’ll see. Why did Jon Rubenstein leave – what’s he been up to? Maybe he was just burnt and needed some time, who knows? Maybe these guys are just going after Apple’s market competitively and aren’t even talking to them – I’d buy that with enough evidence if Bono weren’t on the team.
Update: Some folks on Slashdot pointed me to Bill Gates’s Worst Nightmare.