The Channel Wire

June 11, 2009

Struggling Palm has a hot, new product to challenge the iPhone, an aggressive outlook and a restructured management team. Sound familiar? Like another Sunnyvale, Calif.-based technology company, Advanced Micro Devices, Palm is looking for a fresh start as it takes on tough competition amid brutal market conditions.

Palm named former Apple executive Jon Rubinstein its new chief executive officer Thursday, giving the smartphone maker a new buck-stopper to go along with its well-received Palm Pre, which sold out at stores operated by Palm's exclusive carrier partner Sprint following Saturday's launch of the handset.

That positive showing, coupled with the appointment of Rubinstein to replace Ed Colligan, prompted investors to lift Palm's stock by 12 percent to $13.43 about an hour before the final bell on Thursday. That's welcome news for a company that saw its smartphone revenue dip 72 percent in its most recently concluded quarter as compared to the same period a year ago. Overall, Palm suffered a net loss of $98 million for its third quarter of fiscal 2009 and will report its fourth-quarter earnings on June 25.

In seeking to reinvent itself, Palm's path has similarities to the one taken by its Sunnyvale neighbor, AMD. The microprocessor maker also struggled mightily in recent years as rivals Intel and Nvidia outpaced it technologically. Like Palm, AMD opted for a management shakeup, replacing Hector Ruiz with Dirk Meyer as CEO last July. Like Rubinstein, who is credited as the brains behind the creation of Apple's iPod, Meyer has an engineering background -- meaning both companies are bucking the Silicon Valley trend of putting marketing executives in the top office.

AMD, of course, has been even more aggressive in its restructuring since the Meyer appointment, essentially splitting into two companies with the spin-off of its manufacturing operations last October. There's no indication that Palm is planning anything so drastic.

But the two companies also share another important narrative -- a comeback from the brink of irrelevance with new products that are legitimately challenging their competitors. With the Pre, Palm finally seems to have a product to challenge Apple and Research In Motion, maker of the BlackBerry. AMD, for its part, gained market share at the expense of Intel in the first three months of 2009 -- the first time that's happened since late 2007, according to researcher iSuppli.

It may be that Palm won't like this comparison very much. After all, AMD kicked off its big makeover nearly a year ago and has yet to enjoy a positive quarter as a result. Still, both companies seem to be bucking the odds and are theoretically on track to reverse their fortunes even as a recession rages around them.