Deal for Palm Could Hurt Amazon More Than Android
Sure Palm Inc., the company that made the PDAs a phenomenon and eventually bought by Hewlett-Packard for $1.2 billion, looks attractive to Amazon Inc. With the unmatched multi-tasking experience and distinct features of Palm's webOS platform, Amazon's Kindle Fire and future tablets can distinguish itself from the slew of Android devices in the market. And after HP failed with the TouchPad, Amazon could grab webOS almost for free.
Ditching the Android and have its own platform in webOS could make sense for Amazon. The retailer has an unmatched portfolio of goods and services -- including songs, movies, books, apps, etc. -- that it could integrate to its own platform for mobile devices.
Android, developed by search giant Google Inc. and backed by tech giants like HTC, Samsung, and Motorola, among others, is open source and free and is already the world's number one platform for smartphones and second only to Apple's iOS in the tablet market.
Looking closely though, Android's stint as number one could be temporary as studies indicate that more than 25% of Android device owners are planning to switch to Apple. Apple, on the other hand, has a retention rate of 90% for iPhone users. This means that although device makers have aggressively tried to provide products that would surpass Apple's in terms of specs and features, the Android platform could be pulling them down. Another excess baggage for Android is that Oracle Inc. could win big in its IP infringement suit and Microsoft Corp. has been demanding royalty payments from Android device makers.
Enters Amazon with its unmatched library of content and services. It had the Android platform heavily customized in order to make use of Amazon's cloud computing infrastructure and existing library of 18 million e-books, songs, films and TV programs. And with webOS, the sky is the limit?
But reaching the moon, cost the U.S. government billions and so would Amazon. Amazon couldn't just buy webOS for, say, $300 million and put update it with the retailer's stellar array of digital content. Microsoft is serious in entering the mobile devices market with Windows 8 and Metro next year. Google has further fine-tuned the Android with the next-in-line Ice Cream Sandwich, and another dessert coming soon. And Apple's iCloud syncing all content across all Apple devices would certainly invite more fanboys. So where does Amazon stand? Instead of making just a couple of cents for every dollar of content downloaded from the Amazon stores, it would not have to use some of those money to update the platform and compete with Microsoft, Apple and others. And yes, it would have to invest money in order to compete not only with rival Apple but with former friends, the makers of Android devices. How could it continue sustain a business of selling goods and services at very low margins if it purposely burns money for hardware and software development?
Note that Amazon's strengths, its digital content, are not exclusive to Amazon, hence, the world will go on even if Amazon starts to build a world of its own.
Given the sophistication of today's consumers, a platform or device that doesn't innovate will just end up in $99 fire-sales like the HP TouchPad (and possibly RIM's BlackBerry PlayBook). It's precisely why Android's road to succeed has been bumpy and continued woes despite being the number one should make Amazon think twice about buying webOS. HP slipped when it stepped on webOS. Why would Amazon step on the same banana peel?
They say that Robin laughed at Batman for wearing his underwear over his pants. But Robin's even worse because at the end of the day, he imitated Batman.