Could WebOS Licensing Be Palm’s Salvation?
A worst-case scenario: If Palm’s handset sales further dwindle and its brand awareness continues to decline; if its webOS plug-in development kit fails to bolster its application ecosystem; if the company’s deal with AT&T proves as ill-starred as its deal with Verizon, sales volume continues to slip and it begins to run out of cash–what then?
Bring some better hardware to market and back it up with a strong carrier-driven advertising campaign? An easy answer, I suppose.
But there’s another option as well, put forth by Morgan Stanley (MS) analyst Ehud Gelblum: License webOS. If Palm were to shutter its manufacturing operations and adopt a licensing model for smartphones and other devices, it might just see its business improve.
Says Gelblum: “We calculate that if Palm licensed its OS for $7 per device and won 5-7 percent of the smartphone market in F2013, this could yield ~$0.40-0.50 earnings per share in F2013.”
Certainly an interesting idea–particularly with those possible returns–though it’s not without problems. For one thing, there’s the issue of competition. Android already has quite a bit of traction in the mobile OS market, as does Symbian. And soon, Windows Phone Series 7 will debut, giving device manufacturers yet another option.
Could webOS hold its own against these three? Perhaps, if Palm (PALM) were able to nail down some big hardware partners–HTC comes to mind. But the company would have to tweak webOS to run on non-Palm hardware to do so and, presumably, that would take some effort.
Still, it might be worth pursuing, particularly given the straits in which Palm finds itself these days. A sudden explosion in sales volume at Verizon (VZ) and, later this year, AT&T (T) seems increasingly unlikely.