Mr Operator: Palm Pre - destined for European failure

Mr Operator is back.

If you’re new to the series, you can read his entire back catalogue here. And a quick overview of Mr Operator’s identity? Well, I could tell you, but then I’d have to silence you in some manner. Mr Operator’s identity is a closely guarded secret. That’s because he’s in an influential position at an international mobile operator. And because he tells like he sees it. No sugar coating here. In his last column, he revealed that Google blindsided most of the mobile operators with their Latitude / Google Maps offering. In today’s column, he’s going to tell you why Palm Pre is 6 months too late to the party.

Over to Mr Operator…

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Palmistry is the art of telling a person’s future by reading the lines on their hand. It’s not an exact science – in fact, it’s not really a science at all. Much like forecasting how well a new mobile handset will do, 6 months before public availability.

So many competing forces converge and collude to knock a supposed sure-fire winner off its trajectory to the stars. Coming out so early with very detailed demonstrations of your new device’s capabilities is either a very brave or very stupid move, in this age of quick-fire knock-off OS tweaks. While Apple stole a march with the iPhone, the 2nd (and now 1st) tier vendors have fallen over themselves to get touch devices out there. Yup, the first efforts were pretty dire, but remember in an industry of 12 month development cycles, those dire efforts are last year’s chip paper. The engineers and UI teams have moved on. You just know there’s a lot more where that came from. And where the innovation is in the OS, some changes can be made pretty quickly. No retooling required.

The Pre has (quite rightly) generated a fair old bit of good press for Palm. Like the mad uncle being welcomed home from the wilderness, the mobile industry press outside of the US have embraced Palm once more. No more Windows Mobile, all is forgiven. With some inductively-charged geek fruit and gestures in funny places to liven things up, 3MP + flash, plus some sqeezebox-calendar eye-candy and a removable battery, the Pre is everything to your inner geek the iPhone 3G should have been. But will it be enough?

European consumers just don’t know Palm. Even road warriors only have vague recollections of a monochrome device their IT department gave them to log sales notes on the fly, with a tiny stylus that got lost quicker than you can say Ford Mondeo. So can Palm hope to come to Europe and get a warm welcome? The devil is in the detail.

It will require a substantial MNO investment in marketing, which means exclusivity for at least 3-4 months, possibly more. Palm just won’t get the iPhone’s glorious free coverage in the general press.

At a possible RRP of $250 for a 2-year contract, we can guess that the Pre has a BOM [Bill of Materials] similar to the iPhone. All that goodness doesn’t come cheap – the inductive charging block is essentially a gimmick, as they have included a micro-USB port that is probably able to charge as well. If they plan to sell in China it will have to. If the block also did data transfer with a PC a la iPhone dock, now that would be nice. (Sorry, the geek in me getting carried away). Back to reality.

In the current market it’s all about margin, not ARPU (actually it was ever thus, but try getting away with old reporting tricks these days). The Emperor’s clothes are off, with no-one wanting to subsidise functionality that can’t be monetised well inside the churn timeframe. A device like the Pre is going to be a hard sell to consumers with no cash who still haven’t purchased / will never purchase an iPhone, and to MNO’s with even less cash to splash. O2 have reportedly sold a million iPhones, most locked into contracts with another year to run. Will iPhone owners abandon their ‘preciouses’ to take up with a Pre? Made by who? Not_flippin’_likely.

An LED flash, multiple calendars and inductive charger do not a sex/status symbol make.

To The Kids a Palm is something your dad had ages ago (maybe still does). To mums with prams most of the Palm’s business-oriented integration is pointless. To dads on work accounts it will be a bloody hard squeeze to justify in the current climate. Maybe Palm want to be what the Sidekick was 2 years ago. Times change. US kids got SMS religion. QWERTY email just isn’t the killer it used to be, and with 140 characters still annoyingly popular, don’t expect your ma to be clamouring for a mobile email device any time soon.

But the biggest challenge for Palm is in the form of Nokia. Having the glamourpuss E71 loose out in Barcelona to an upstart knocked up in a shed somewhere [the INQ1] has got to have galvanised them onward and upward. The first disappointing touch devices are, again, 12 months R&D delayed. The N86 is a very promising start. Add touch done well, plus the E71’s keyboard somewhere, and you’d have a million-a-week seller. Even if the Pre is twice the device on paper or in the hand, put it on a shop floor next to a QWERTY/Touch Nokia and weep.

I’d love to think I’m wrong here, but I can’t escape the nagging feeling that Palm Pre will arrive at the ball 6 months late, to find others with much bigger names in Europe are already waltzing away with the touch/QWERTY cash.

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If you’d like Mr Operator to give an opinion on your company, your product offering or comment on news, drop me a note and we’ll see if we can arrange it.