Palm’s Biggest Problem: Sprint
“Were not for its lack of distribution, inadequate advertising, and resulting limited developer community, Palm would be shipping far higher unit volumes than it does today.”
So begins a research note from Morgan Stanley (MS) analyst Ehud Gelblum that says the end of Palm’s carrier exclusivity with Sprint can’t come soon enough. According to Gelblum, limited distribution in the U.S. through the country’s third largest wireless carrier has hamstrung Palm by limiting the addressable market for the company’s new super-smartphones, the Pre and Pixi.
“We believe much of the scale issues Palm has experienced to date have been a function of its exclusive distribution agreement in the US with Sprint, which despite having deployed advertising dollars to the Palm brand, has seen negative net sub adds for 9 quarters and has had a mixed marketing message in its handset portfolio simultaneously promoting Palm, the Samsung Instinct, HTC Hero, and LG Fusion,” Gelblum writes.
“However, we expect this to change rapidly in 2010,” the analyst adds, “as the CEOs of both AT&T and Verizon Wireless stated last summer that each would carry Palm webOS products after the exclusivity with Sprint expires which we expect to happen in calendar Q1 of 2010.”
And once Palm (PALM) has enough multicarrier distribution support, well, look out. With Sprint (S), Palm has an addressable market of 26 million potential subscribers. With Sprint, Verizon (VZ) AND AT&T (T), that market spikes to 196 million. Throw in China Telecom and it spikes to 406 million.
That’s a large addressable market and one that will undoubtedly juice webOS development. A richer Palm apps environment will attract more subscribers to Palm and, in theory, bootstrap the company into relevance.