Strategic shortcomings of Pre in the post-iPhone era

In Who can beat iPhone 2.0? we explored what it would take to compete against the now-iconic device months before the 3G version was introduced. Those 10 factors that specifically defined the strength of the iPhone then remain virtually the same today…to the dismay of its competitors.

In platform battles the victory depends not only on the disruptive prowess of the challenger but also on the ineptitude of the contenders. So it was for Microsoft whose competitors on the desktop from IBM to Apple to Novell made one strategic blunder after another for a decade. The same goes for Apple which established its dominance in digital music in just five years when all its competitors thought their feature-laden gadgets without an ecosystem would turn into iPod-killers.

By capturing nearly a quarter of the market share, a third of the revenue and most of the mind share in less than two years, Apple is well on its way to dominate the smartphone space. Apple’s competitors have shown a remarkable degree of ineptitude so far by copying disjointed aspects of the iPhone’s industrial engineering, multi-touch UI, media handling and App Store.

Until, that is, Apple’s former iPod division boss Jon Rubinstein, now the Executive Chairman of Palm, introduced the Pre at CES last week:


Pre’s introduction, website, technology packaging, industrial design, UI, product naming and positioning…down to the flow of its CES presentation were pointedly, but perhaps not surprisingly, Apple-like. Of all the current iPhone competitors, Pre clearly captures the “soul” of the iPhone as much as any product not-from-Cupertino can. Whatever Pre “borrows” from the iPhone, it does so not with the brazen indifference of recent iPhone-killers, but with care and purpose.

The Pre challenge

As much as can be gleaned from a presentation, Pre does two things better than all the other iPhone competitors so far: attack Apple’s weak points and advance the art of mobile device design in its own right. There are the obvious ones iPhone naysayers have been quick to highlight: physical keyboard, pervasive multitasking, background processing, removable battery, Bluetooth stereo, camera flash and, of course, copy & paste.


More significantly, however, Pre goes beyond the iPhone in some interesting ways. Its TI OMAP 3430 processor is the highest performance, most power-efficient processor available from the ARM family. Pre is the first major phone with an optional back that can magnetically attach to a conductive device for charging wirelessly. Optimized for on-the-go, one-hand operation, it incorporates a “gesture bar” at the bottom that stands apart visually from the screen but is integral to it in being able to initiate a number of device-wide gestures. But what really separates Pre from all other iPhone-killers is the uniquely Apple-like systems thinking that has resulted in what Palm calls Cards and Synergy, as parts of its new Web OS.


Cards is like Mac OS X Exposé in that, with a gesture, all running apps/windows are scaled down as a horizontal strip of small “cards.” Users can not only drag, re-arrange and flick these apps/windows off the screen, but also interact with them as they continue to be active.

Synergy, on the other hand, exposes Apple’s hitherto weak spot in social computing. Pre can seamlessly integrate multiple email, SMS, IM and social network accounts by keeping data separate but presentation unified. This also allows users to branch off into any of those services from within any entry point, without having to switch accounts or applications.

System-wide as well as cloud-based live search, local storage via HTML5, visual WebKit bookmarks, unified calendaring, unobtrusive notifications and a number of other software features indicate that, unlike other iPhone-killers, Palm has thought through a variety of pain points currently besetting the iPhone. Pre’s interface consistency goes much deeper than the few splashy touch-based screens we’ve come to expect from the recent crop of iPhone-killers that fall back to WIMP ugliness as soon as users navigate one or two levels down into an app.

So can Pre beat iPhone?

It turns out Pre’s most formidable challenge is not the iPhone, but its parent company Palm and exclusive carrier Sprint.

Palm (whose CEO famously dismissed the iPhone with “PC guys are not going to just figure this out. They’re not going to just walk in”) is beleaguered, to recycle an epitaph once attached to Apple of the mid ’90s. Prior to the Pre introduction most analysts had already left Palm for dead, and without the Elevation Partners’ recent $100 million investment it likely would have been. This is further compounded by the fact that by introducing the Pre six months ahead, Palm may have handicapped the current sales of the rest of its lackluster product line. Assuming it can stay solvent until revenues from Pre can resuscitate it, Palm has lost so much mind and market share, along with customers and developers, that erasing that “beleaguered” label will be a monumental undertaking.

Palm is clearly late to iPhone’s party. By the time the first Pre is sold, the iPhone will likely have 30 million users in 70+ countries, 15,000 apps, a huge developer and peripherals ecosystem, perhaps a third of the market share and 40% of smartphone revenues. And that’s before the next generation iPhone device and OS are introduced.

Too little, too late?

Pre already has a number of shortcomings. Its enterprise story (corporate mail, security, vertical apps, deployment ease, etc.) remain largely unknown. As is its JavaScript-HTML-CSS based development platform Mojo. Is it powerful, fast, flexible and extensible enough? Can it compete with SDKs from Apple or Android? What about Palm’s app store regulation strategy? Not much has been explained about Pre’s graphics, animation, 3D or gaming capabilities either.

Being exclusively tied to Sprint can also be problematic for Pre. Having emerged as one of the casualties of the new smartphone wars and lost a significant number of customers and revenue, Sprint too is a beleaguered company. Its debt has been lowered to “junk” status by Moody’s and Standard & Poor’s last year. Sprint is considerably smaller than either AT&T or Verizon. Pre’s most likely would-be early adopters who can appreciate its design smarts are already tied up with multi-year contracts with other carriers and would be hard to switch. Finally, can two beleaguered companies properly price, subsidize and market the Pre in the middle of a recession?

Prejudging Pre’s prospects

Unfortunately for Palm, most markets generally coalesce around two, and at best three, players. By all accounts the iPhone is geared to claim one of those spots. The challenge for Palm then is to carve out an online-savvy demographic than can best exploit Pre’s social-computing Synergy focus with a beyond-iPhone strategy. Pre goes into this battle without Apple’s superior brand recognition, iTunes empire and mobile games franchise, or RIM’s business clout, Nokia’s volume, Microsoft’s corporate connections and Android’s openness banner. Trouble is, all these players are also in hot pursuit of that same 18-34 year-old, highly lucrative demographic segment. The notion that Palm may not have the wherewithal to successfully pursue that demographic and execute with uncharacteristic precision is perhaps why some regard the Pre as an attempt by Palm to finally get acquired by a player with deeper pockets.

As we have seen in Who can beat iPhone 2.0? it’s the seamless integration of critical factors from volume component pricing to games, from enterprise integration to App Store, from iTunes integration to a billion-dolar ecosystem and beyond that makes the iPhone such a formidable competitor.

Pre would have been favorably competitive against the iPhone as a platform two years ago. But six months from today it will have an extremely steep hurdle in front of it erected by a company with a golden brand, thriving mobile business and $25+ billion in cash reserves. Unlike RIM, Nokia or Microsoft, however, Palm must at least be given credit for fielding a credible iPhone-alternative device — hopefully not too late for its investors.