Brighthand reports that palmOne sold three million Zire PDAs in less than 18 months. Many articles I’ve read say that this is a confirmation of the sub-branding strategy that was executed well before Palm acquired Handspring.
I want to go back to an article written in 2002 about the original Palm Zire and quote a friend of mine, Paul Coster, an analyst at JP Morgan Chase. He said, “We understand that [Palm has] gone back to the drawing board and designed [the Zire] from ground up to deliver strong gross margins at the outset.” At the time, the thinking was that Palm’s gross margins on the Zire were about 25 percent, while they made significantly higher gross margins on more sophisticated products.
From what Todd Bradley (palmOne President and CEO) said, I conclude the strategy is still working:
The Zire subbrand business strategy is working. Zire products are attracting new customers to the handheld category, increasing the palmOne market share, contributing to our handheld revenue and establishing a customer base for an upgrade business. And they’ve enabled palmOne to expand its sales channels worldwide.
The Brighthand article goes on to say that the Zire 71 was the best selling PDA in the U.S., until palmOne shipped the Tungsten E. This makes a lot of sense because the 71 has a very good digital camera and built-in color screen. It also comes with the RealOne Media Player application built in, which allows the PDA to be used as a very good digital music player.
palmOne kept the price of the unit low by leaving out wireless networking, an SD card slot, and flashable ROM. These features are nice-to-haves for more experienced users, but they would be overkill for many first-time PDA owners.
I think the Zire 71 is a terrific deal. It’s a very good PDA to give as a gift, if you think that the recipient is likely to embrace the technology and want more than just a bare bones PDA once they become familiar with it.
It’s very possible that the next set of product announcements from palmOne will include a unit to replace the 71. If that happens, the price of the Zire 71 may come down to an even more attractive level.