It had been flagged for months, but Palm's long-awaited European offensive in the arena of smartphones—pocket computers that double as a sophisticated cell phone—has finally kicked off in earnest. On Sept. 12, Palm (PALM), with British wireless partner Vodafone (VOD), unveiled the 3G Treo 750v smartphone. Like rivals such as Research in Motion (RIM), Motorola (MOT), and Nokia (NOK), Palm is moving aggressively to grab a bigger slice of a red-hot market—global sales of smartphones are expected to grow about 34% a year, reaching $54.6 billion by 2009.
The new Treo, available in nine European countries by the end of the year, has features specifically tailored to European customers, such as advanced text messaging. BusinessWeek.com's Kate Norton spoke with Ed Colligan, chief executive officer of Palm, about the Treo750v, and the company's plans for Europe.
Given the announcement on Sept. 7 that first-quarter sales would fall short of original forecasts (see BusinessWeek.com, 9/8/06, "Treo Troubles Trigger Palm Plunge"), do you see Europe as the next frontier of growth for Palm?
We always said for the last couple of years that global expansion was critical to us for growth, and what you saw last quarter was really that coming home to roost a little bit because of our dependence on fewer customers, specifically in the U.S. So with this launch with Vodafone, which is one of the leading carriers in the world, as well as with a great product really designed for the European market, we do think it's a nice next step for our growth.
What's your goal for the European market?
To date, we really focused our efforts in the U.S. for the smartphone business and we've built relationships with every major carrier there. We have a 35% market share in that area. In Europe, what we have is a handheld computing biz. We've sold more than 7 million devices of various PDAs in Europe and have a great presence relative to that, but people don't know us as well in relation to the phone or handset business. So this is a big launch for us.
In Microsoft (MSFT) [which provides the operating system], and Vodafone, we have some major partners. We will bring on other carrier partners in reasonably short order. We are also going to announce another major product for the European market before the end of year, which we hope to take across the continent and hit some really new price points and reach a new consumer market. So we're coming in here really focused.
How does Palm plan to differentiate its products against established rivals in Europe such as Nokia's E61 and Research In Motion's BlackBerry?
Our entire history has been making products that people love to use. And when people use these products they say things like "I can't live without it—it's my brain!" They talk about it like it's a pet. There are a lot of handset companies who have tried to make products and do these kinds of applications really well but they don't do a very good job. Palm makes better products than anybody else in the mobile-computing element of this marketplace.
The [Treo750v] is a great phone too. If you see people in Europe with BlackBerrys, most of them [also] have a phone. Why is that? There's no question that if you carry this product you'll love it as a phone and you'll love it as a data application, and that's how we'll differentiate ourselves.
What is the growth potential for the smartphone market?
It's got huge growth opportunities. Firms like IDC and Canalys figure anywhere from 35% to 65% compound annual growth rate. I think it's probably in the middle to the lower end of that range, but it's still major growth. Personally I think the biggest driver is people's understanding and access to these devices and what they can really do for them. That's why I'm really focused on education of the consumer.
What technologies do you see as important to incorporate into future devices?
Probably the biggest thing hardware-wise is better and better displays. That's the "face" of the device and is what appeals to people a lot. I think Wi-Fi is a technology that is coming. It's already obviously here relative to laptops, but as mobile technology we want to deploy that, but so it's really right—i.e., so it doesn't suck batteries down so you can't make a phone call. I think GPS is also a pretty critical technology that has been well deployed on standard devices but it can be pretty compelling if it gets incorporated into these as well.