The last number isn’t that small at all. Moreover, in the spring of that year the Pocket PC camp was celebrating their jubilee: the millionth sold computer running this operating system. And they did it in a really short time, because only a year has passed since the launch of the first Pocket PC version. Add also that Pocket PC was very active in the corporate market sector from the start, which had always been a dainty bit in terms of pricing. This platform had a higher share there than in the PDA market at large.

Quite naturally, the PalmOS camp was looking for ways to unlock the corporations’ doors. Handspring signed a deal with Ingram Micro to use the wide distribution channel of the latter. Palm was trying to buy Extended Systems. That company was helping corporations to provide the workers with an access to data via wireless devices – this looked like a great opportunity for promoting future Palms with wireless capabilities. The deal has never been signed, though. They intended to exchange the Palm stock for the Extended one, but the former slumped down seriously because of depressing results of the previous quarter.

Well, there couldn’t have been another way. Palm was all in a fever, ending the first quarter with $471 million sales volume and $1.9 million net loss. Meanwhile, a year before the situation was quite contrary: smaller sales volumes ($272 million), but $11 million profit. This tells about both: the profit from an average PDA and Palm’s manufacturing costs. The costs were all-important, as the company actually sold two times more PDAs – 2.1 million against 1 million units. Thus, the average sales price dropped by 20%, of course, but this is not a reason for the losses, especially considering the doubled turnover…

Of course, the company was fighting the negative situation. One solution was quite simple. They would launch new models, more expensive and elite, that would push the average selling price (ASP) higher.

The second trouble, being the consequence of improper company management, was much harder to overcome. Firstly, Palm had seriously overestimated demand and didn’t react fast to the disappointing reality. As a result, the distribution channel got clogged up with older PDAs with all the ensuing consequences: new models should be ushered into the market, but the sellers had to sell out their stock (in spite of low demand!) before doing this. Not only ordinary users were cutting their spending, but also those much-hoped-for corporations. This issue could be solved in a clear, although unpleasant way: by introducing abrupt price cuts and similar measures could work for stimulating sales volume growth, too.

Secondly, although the company was the leader in the field, they definitely overestimated their own potential and lived far beyond their means. They had started up a lot of projects, which would only bring some revenues in a distant future. This issue had its solution, too, and again it was unpleasant: staff layoffs.