Palm has gotten smaller this year. Departures included entire departments, such as the WiFi team, which we reported was eliminated in June, and resignation of senior executives, such as good friend to the community and former Director of Public Relations, Jim Christensen, who joined HP to head their mobile device PR efforts. Now reliable reports indicate that Palm, currently an approximately 1,200 person company, is reducing by hundreds of people worldwide.

According to Palm, the company is sharpening its focus and better aligning resources behind core initiatives that they believe will make the greatest impact to their business. The news comes less than a week after the company reported substantially lower year-over-year financial results below Wall Street expectations, and at a time the company's share price is trading near its 52 week low.

Palm's challenges stem from an increasingly competitive product landscape, including advanced devices like the GPS enabled Blackberry Curve, WiFi enabled iPhone, and GPS/ Wifi/3 megapixel enabled AT&T Tilt. Powerful competitors Samsung and Motorola are taking market share with the Blackjack II and Q9, respectively. While Palm used to differentiate itself by converging more features into the Treo than could be found in any other device, Palm no longer leads in either the convergence or specifications race.

Palm is down but by no means out. We expect strong Windows Mobile and Palm OS-Linux devices from them.

Windows Mobile comprises nearly half of the company's smartphone sales. Palm has successfully penetrated the enterprise market, thanks to a perception among corporate IT executives that Palm devices are reliable and Windows Mobile poses the fewest integration challenges with Microsoft's Exchange Server, a common enterprise platform.

We believe Palm is working with HTC to produce Windows Mobile devices, a potentially extraordinarily powerful alliance. The most powerful GPS/Wifi enabled Windows Mobile devices currently sold into the US market are from HTC. HTC has told us that they are not releasing under their own brand name a Windows Mobile device with the form factor of the Treo. We believe that's because Palm is contributing to a partnership with HTC their enhancements to the operating system, as well as Palm's carrier relationships in the US.

We can tell Palm has learned a big lesson about resting on their creative laurels by their actions in the Palm OS Linux realm. After scrapping an entire product Line, the Foleo, to focus exclusively on Palm OS Linux development, Palm has told us they are committing two full years before releasing a Palm OS - Linux device. While this long-term approach to their next device may not thrill investors looking for a quick return, it should certainly excite consumers. It suggests an uncompromising commitment to an end result.

Over the past several years, Palm has faced serious challenges developing devices with Palm OS because they did not own or control the operating system, and development was badly bungled by PalmSource (now owned by ACCESS Co.). Palm was one of the only manufacturers in the world who supported PalmSource. Current versions of Palm OS are not capable of multitasking, making it difficult for Palm to implement features like internal WiFi and GPS.

However, Palm has taken full control over the development of their operating system by buying the rights from ACCESS. They added to their design team former senior members of Apple's iPod team. Clearly Palm grasps their past mistakes, and is moving in the right ways to compete in the future.

So what does the future hold in store for Palm?

Apple indicated that they are opening the architecture of the iPhone and increasing the data speed to 3G, next year, which will significantly enhance the appeal of the iPhone. Google announced their open source Android operating system, which is being supported by some of the most successful device manufacturers in the world. Several new high end Windows Mobile devices are coming to the market from a variety of manufacturers. So Palm is going to face an increasingly competitive environment.

However, many analysts predict the smartphone market will grow by a multiple over the next five years, and that, "all boats in the sea may rise." 2008 may hold exciting things in store for Palm consumers in the Windows Mobile realm. We believe 2009 will bring a host of commercially appealing surprises in Palm's Linux devices.

Bottom line: it's going to be a dog fight.

Let us know your thoughts about the future of Palm below!

Related Links

Difficult Financial Quarter for Palm

Palm WiFi Technical Team Decimated

Own a Palm Centro? Check out CentroSite.com!

News of the current Palm layoffs via PalmInfocenter.

Palm Centro gets City Chase participants to finish line - May 01, 2008

Palm launches Centro in Columbia with Comcel and Movistar - Apr 18, 2008

Viva el Centro - Apr 07, 2008

Microsoft demonstrates new Windows Mobile 6.1 for mytreo.net - Apr 04, 2008

Pick-up line contest - Apr 04, 2008