There were three bits of mobile news that dropped at the end of last week, and each one sheds some light on the other. The first and perhaps most significant announcement was Sony’s revelation that it expects its mobile sales to be down 50 percent sequentially in the first quarter of this year (ending in March), which, if true, would underperform analysts’ already abysmal expectations for the company.
One analyst quoted in the Reuters coverage of the announcement suggests that a drop of this magnitude is mostly due to issues that are Sony Ericsson-specific, and the mobile sector as a whole isn’t quite as weak as the SE numbers suggest. I certainly hope that’s true, but with Nokia announcing another 1,700 job cuts last week, it’s hard to deny that the situation in the mobile segment is still getting worse.
If you think the Sony Ericsson numbers were bad, Palm’s numbers were even worse: the smartphone maker announced in its most recent quarterly earnings report that its sales have dropped 72 percent. Of course, what’s going on here is obvious: not only did Palm announce the Pre, but they also basically told everyone that all existing Palm devices will be totally obsolete the day Pre launches, because the current Palm software platform will go bye-bye. So, knowing this to be the case, what surprises me is not that Palm’s sales dropped 72 percent, but that anyone bought any Palm products at all after Pre was announced. Who are these people who are still buying functionally obsolete Palm smartphones, and why are they doing so?
At any rate, the analyst and pundit consensus seems to be that Pre will “make or break” Palm, but I think that’s too optimistic. A more realistic way to phrase it is: if Palm screws up the Pre, it will definitely break them; but even if they hit a homerun, in this awful market, with everybody else’s sales still tanking at such an alarming rate, there’s no guarantee that enough customers will open up their near-empty wallets and spend their grocery money on the Second Coming of the “Jesusphone.”
If I were Palm, I’d be leaning hard on Sprint to offer a Pre-paid (har har) option, because there are some indications that more customers are ditching their wireless contracts and moving to pre-paid phones. It’s about time that people wake up to what a bad deal we’re all getting from wireless carriers.
On the bright side for Palm (if there is one), the people who are still buying phones are buying smartphones, and this change in the product mix for the overall mobile market is probably a big part of what’s killing Sony Ericsson’s sales.
We reported a while back on Dell’s rumored plans to enter the smartphone market with a me-too WinMo device, and after some random speculation about Moorestown and the like, I concluded: “But back here closer to reality, it’s much more likely that Dell will decide that now is not the time to get into smartphones..” If this Marketwatch story is to be believed, cooler heads at Dell prevailed, and the company is not going to jump into the WinMo space. Instead, Dell is “going back to the drawing board,” and possibly looking to make “related acquisitions.” That last line has some muttering about a possible Palm purchase. Indeed, if Palm stumbles out of the gate with Pre, the market will show its share price no mercy and it could quickly be a very cheap buy for the likes of Dell.
By Jon Stokes