Palm Wants Apple Core, Really Needs Sprint Alternative

(MoneyWatch)  Palm seems to be on an exec hiring spree. Only, if you're a recruiter, don't bother to call unless you've got a line on talent from Apple. Palm just snagged its fourth executive that spent time in Cupertino. Maybe the company is taking to heart the concept of an Apple a day keeping the doctor away, but you have to wonder whether it would better focus on realizing that to train for the long haul, a wind Sprint might not be the best training regime.

Certainly snagging someone like Jeff Zwerner can't hurt, with not just an Apple creative director of packaging, but strategic design consulting work for the likes of HP, Coca-Cola, Disney, and Gap. He clearly gets consumer product and packaging design, which will be critical to Palm. And before landing him, the company reeled in other former Apple people: hardware senior vice president Jon Rubinstein, product development SVP Mike Bell, and CFO Fred Anderson.

But is that enough? The company has already garnered, if not universal enthusiasm, at least highly positive reactions to its Pre. Unfortunately for Palm, there's a lot more to retail -- and that's what the consumer electronics industry boils down to -- than good packaging or product. A company needs to be in the right spot with product to reach customers when they are ready to buy. Given its exclusive deal with Sprint, that may be where it has fallen.

According to various analysts, Palm Pre sales have slowed from an initial 50,000 a week to an apparently stable 25,000 a week. Even at the earlier pace, the annual sales would have been 2.6 million, or a fraction of iPhone sales. By the end of June, the numbers were purportedly a total of 300,000. A good deal of that simply reflects the popularity of the iPhone. However, look at the difference in results between Apple's partner, AT&T, and Sprint, the old nag to which Palm has hitched its wagon.

Depending on whom you ask and how you parse the numbers, AT&T added 1.4 million net subscribers in the second quarter, although analyst consensus had expected 1.08 million. It activated 2.4 million iPhones, with a third being new subscribers (which, interestingly, suggests that a majority portion of iPhone sales, when new models are introduced, is upgrade business, not customer base expansion). Without the iPhone, at least one analyst noted that new subscribers would have been down by 25 percent from the first quarter.

By comparison, Sprint was a train wreck, losing 991,000 annual contract customers in the second quarter, though that was actually an improvement over the 1.25 million lost in Q1. Verizon also gained net subscribers in the same period. To put it differently, Sprint wants massive sales, but it's depending on a company that is falling far behind its major competitors, even taking the iPhone into account.

That suggests, to me, at least, that Pre sales that are softer than the company might like may have more to do with being tied at the hip to Sprint than with the phone itself. Still, the choice of business relationships is ultimately an issue of poor management choice. Maybe what the company needs is not another design or product hire, but someone who can make business relationships work -- and get the handset into either AT&T or Verizon.

Image via stock.xchng user Abyla, site standard license.