Palm to close retail stores

Palm plans to close its retail stores in an effort to focus on fewer programs and better compete, the company said on Thursday.
All of Palm's eight branded retail stores, as well as its 26 stores within Airport Wireless shops, will close.

The move may stem from increased competition from Research In Motion's BlackBerry products. Prior to about a year ago, BlackBerry dominated the enterprise market and Palm was popular among prosumers, who typically buy devices in retail outlets, said Bill Hughes, an analyst at In-Stat. But since then, BlackBerry has grown more successful at selling its handhelds at retail, encroaching on Palm's traditional prosumer market, he said.

The stores didn't make much sense for Palm from the beginning, according to Hughes. "This doesn't really surprise me," he said. Usually, manufacturers open their own stores when their retail distribution strategy isn't working, he said. But Palm has reported a string of quarterly losses and may have decided to close the stores and boost its efforts to sell through other retail outlets as a way to cut costs.

Palm said the store closings come as the company continues to focus on core business initiatives, consolidating resources behind fewer programs. For a similar reason, it cancelled its controversial smartphone companion product, the Foleo, that was scheduled for release in the middle of 2007.

Palm has struggled over the past couple of years as the smartphone market grows increasingly crowded, and as it tries to phase out its PDA (personal digital assistant) business. The company is building a new Linux-based operating system that is scheduled to be released at the end of this year, with commercial products hitting the market shortly after. The software, which many thought would hit the market at the end of last year, will compete with Google's Android Linux-based smartphone operating system. Phones based on Android are expected to ship starting in the second half of this year.