Dell and Palm face tough reality of smartphone business

MOST READ
LATEST NEWS

Compare broadband and
mobile phone deals at Top10.com

EVENTS

4G World 2010 October 18 - 21, Chicago

4GWE Conference, Oct 4-6, Los Angeles

The Location Business Summit USA, 14-15 September, Crowne Plaza, San Jose

Advertize your telecoms job

JOBS

Mobile Industry & Technology Journalist - freelance

HOT TOPICS

Dell and Palm face tough reality of smartphone business

By CAROLINE GABRIEL

Published: 23 March, 2009

READ MORE: Palm | Handset | Dell

At Mobile World Congress last month, it seemed almost every company, from PC vendors like Acer to carmakers like Hyundai, had decided to launch a smartphone, cashing in on one of the few growth areas in consumer electronics. This month, the headlines are highlighting just how tough it is to be a smaller player in this sector. As the channel waits eagerly for a new iPhone, and sells out of the newly launched Nokia 5800 touchscreen musicphone, the lesser names may be running into obstacles, especially in terms of carrier acceptance.

Cellcos are relying on fewer, but high profile, smartphone launches to attract consumers, and so they are fussier than ever about how well these phones perform. So speculation is rising that the Palm Pre will suffer a potentially disastrous delay, while Dell's much anticipated smartphones are reported to have been rejected by carriers.

"From our conversation with supply chain and industry sources, it appears that it ultimately came down to lack of carrier interest and small subsidies, making it difficult for Dell to make a profit. In our view, the last thing Dell needs is to enter another money losing business," Wu wrote last week.

Dell is unaccustomed to the carrier model, and only if it can come up with a highly differentiated device, will it be able to persuade cellcos to offer heavy subsidies - if they won't, its margins will be razor thin.

Meanwhile, the longer that Palm refuses to announce a firm date to ship the Pre, the more intense are analyst nerves that this is being delayed beyond the promised timescale of 'by the middle of the year'. The most likely reason would be glitches in how it performs on the network of Sprint, its US exclusive launch partner. While Sprint needs the marketing and sales boost expected from the Pre launch as desperately as its vendor, it also cannot afford to put out an underperforming handset, especially given its recent waves of customer defections, some citing service quality. AT&T may have (just) got away with the problems of launching iPhones that were arguably not ready for its network, but consumers might not be so forgiving of Sprint and Palm.

At the conference call for Palm's awful third quarter results last week, CEO Ed Colligan said: "We are under no illusions about the hard work that remains with bringing the Pre to market", but added: "I have never had more confidence in Palm's ability to bring a new product to market on time and at scale." There were few concrete facts to back that up, let alone a target date, though CFO Douglas Jeffries said Palm had learned lessons from the delayed roll-out of the Treo Pro and said the firm had been working "more collaboratively" with Sprint and had gained better understanding of the process to launch. "It's never a slam dunk, but I'm as comfortable as I've ever been that we'll nail it," he said.