Palm Pre

Since I am a bit of a gadget geek, Jon's post on the new Palm Pre caught my interest. Jon basically explained that the new Palm will not be able pull the company out of the whole that they have been in over the last decade, without using some contracts to hedge against their risks.
I agree with Jon that the new phone will not be able to rescue the company by itself, but I found a few articles that would suggest that Palm could revive their current economic status through proper risk management decisions.

Palm was the blackberry about a decade ago and there are still plenty of loyal Palm followers out there. Thus this is the first point; in several lectures we have discussed the importance of a company's reputation to its sales and customer loyalty. An example of this is the iPhone. The success of the release of the iPhone relied heavily on the previous success of iPods and the reliability of Apple's handheld devices. Everyone knows that palm devices were cutting edge and reliable when they first came out and everyone had to have one. Thus I feel the new Palm Pre will be a success as it is riding on that reputation that Palm had created over a decade ago.

The next important factor is proper management. The crucial factor with the Pre is the timing of the release of the phone. McNamee, who is a major investor stated in an interview that people always want to buy the coolest new thing. That was the case with the iPhone. Now, two years later after the release of the iPhone, people are going to want to buy the latest gadget after their cell phone contracts have expired. Thus the Pre is going to be released at the optimum time for it to have the greatest chance of succeeding.

Lastly, I found another article on unwiredview.com that does not take a risk management view on this situation, but more from a perspective of economics. The basic law of supply and demand states that if the supply of a product is limited, demand for that product will go up, and thus the price of the product will rise. Palm is planning to limit their supply to only 200 000 units of the Pre. This limitation will increase demand for the Pre, but even though the prices are fixed with signing cell phone contracts, this increase in demand might be a strong enough incentive for people to switch from their curent cell phone contracts and pay the high cancellation fees.

So hopefully through proper risk management decisions and a bit of good luck we can see the Pre make Palm great again and save them from their 6 straight quarter lossess of over $650 million.