Palm to Focus on Hardware in New Ads

Hoping to boost flagging sales, PDA maker Palm, Inc. announced plans to unveil a new advertising campaign on Monday, which aims to hook holiday shoppers.

The announcement comes less than 24 hours after the Santa Clara, Calif.-based firm abruptly lost its high-profile chief executive Carl Yankowski amid internal confusion about Palm’s future direction.

The company is finalizing the separation of its hardware and software businesses as outlined in a restructuring plan announced earlier this past summer. Although Palm’s market share in the hardware side has suffered as of late, a recent survey showed its software still dominated the market for PDAs.

But the significance of the latest television and online ad campaign is its focus on the hardware side of the business. In a new twist, the campaign seeks to call attention to the company’s hardware features. Specifically, the new ads are expected to focus heavily on the fact that Palm’s m125, m500 and m505 PDAs include slots to add expansion cards, which can increase memory, serve as a way to back-up data, or add new applications.

The ads are also expected to highlight features available through Palm’s Universal Connector, a device that attaches to the company’s PDAs and allow it to add peripherals, such as a digital camera or modem.

The focus on hardware is something of a dramatic change for Palm, which in previous campaigns has championed the cause of its OS, which it licenses to other manufacturers, such as Sony and Kyocera — and not necessarily its devices’ technology. Last November, the PDA maker launched a $100 million rebranding campaign designed, in the words of a spokesperson, to “reposition … Palm from what people perceive it to be today — which is, frankly, a handheld computer company, maker of the most popular handheld computer today — to a Palm OS-licensing company.”

Since then, however, hard times have befallen the PDA manufacturer. During the past year, Palm has had to cope with flagging sales, vast amounts of unsold inventory, a delay of its m500 series’ launch, and a debilitating price war.

In September, Palm reported that sales had fallen off 47 percent from the previous year’s levels, down to $214 million, and that its $193 million quarterly burn rate had left the company with but $321 million in cash remaining in the bank.

To be sure, Palm contends the new campaign will equally highlight the OS capabilities. The new ads, designed by San Francisco-based AKQA, seek to highlight the vast array of applications that the Palm OS can run — an approach that Palm has taken with previous print and out-of-home campaigns.

“We’re moving from the mobile professional to the mobile majority, a market where useful and relevant applications are king,” said Ken Wirt, senior vice president of the company’s Solutions Group Marketing unit. “We have an outstanding applications story to tell, and we’re telling it.”

Through January, the campaign will promote a special offer of a free, 16-meg Panasonic SD expansion card to purchasers of a new Palm m125, m500 or m505. The PDAs also will come with $250 worth of coupons, Palm said.

“Our expansion capabilities and SD card promotional offer make our story even more compelling,” Wirt said. “These little cards unleash a torrent of capability.”

The ads, which use music by techno club band Daft Punk, are slated to debut on national cable television and online on Monday. The company said the ads will likely appear on major U.S. and Canadian networks, as well as internationally.

“The ads are modern and digital, and they reflect the personality of Palm, and there’s also a nice link with resellers,” said Kirk Citron, chief strategic officer of AKQA. “I think the message will resonate with a broad range of people — especially the expansion message and free SD card offer, which lets people experience the additional value they can get out of their Palm handhelds.”

Shares of Palm were up 20 percent in Friday trading.

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