Palm’s New Reach

McNamee's partners at Elevation include U2 frontman Bono and, more notably, former Apple finance chief Fred Anderson, who, alongside Rubinstein, helped engineer the turnaround at that company a decade ago. Anderson is the one who brought Rubinstein to Palm. He insisted that Elevation had only agreed to put money into Palm if they could convince Rubinstein to come aboard. At that time, in the summer of 2007, Rubinstein had left Apple and was living in Puerto Vallarta, Mexico, building a vacation house. Palm flew a team of execs down to meet with him over a three-day weekend. They showed Rubinstein the projects they were working on, including a new operating system that was code-named Nova. Palm's aging operating system, Palm OS, was originally created for a relatively simple personal organizer; it was then added to and patched up to do things like power a cell phone—a task it was never intended to perform. It was a bit like using a lawn-mower engine to build a go-kart, then adding a bigger chassis and turning the go-kart into a real car, then turning that into a plane, and then trying to make the plane fly to the moon. Palm needed a fresh start.

Rubinstein loved the new operating system and signed on. He immediately decided on a radical course—killing off almost all of Palm's products and projects except for a couple of "transitional" devices that could keep sales coming in while engineers toiled away on Nova. Rubinstein brought in a slew of new executives, replacing all of the executives in engineering and much of the engineering staff. This crash course of paring the company back to its core is exactly what Apple did a decade ago. Jobs and his team killed off dozens of products, leaving Apple with only four things to sell: two laptops and two desktop PCs. Then they put a huge amount of effort into developing a new operating system, called OS X, which would become Apple's key product in the decade to come. Now, at Palm, "we're using the exact same playbook," Rubinstein says.

Rubinstein's idea is to leap ahead of everyone else in the mobile space by creating a new software platform to power the Pre and a string of as yet unannounced mobile devices. If the plan works, Palm will bounce back and become cool—and profitable—once again. If not, "we turn into just another Windows Mobile phonemaker," Rubinstein says—which is another way of saying they roll over and die. Operating systems are tricky things to create, but Rubinstein believes that without this piece of the puzzle a tech company cannot control its destiny. Palm's Nova system, which will bear the official name Palm Web OS when it ships, is based on the open-source Linux operating system and has been created from the ground up to run only on mobile devices. In contrast, Apple's OS X was originally created for personal computers and then got squeezed down into the iPhone.

While the iPhone has demonstrated the power of putting a real computer operating system on a mobile device, the iPhone itself is far from perfect. For one thing, the battery life on the new 3G model is abysmal. And while it is cool to be able to browse the Web from a handheld device, the iPhone's Internet experience is nowhere near as good as the experience you get on a laptop or desktop computer. It's much slower; Rubinstein and his team say that's because the OS X code is not lean enough to run swiftly on a mobile device's relatively tiny processor and small memory footprint. And you can only do one thing at a time. To change applications—to go from checking e-mail to making a phone call to putting an appointment in your calendar—you have to keep climbing back to the home page and then down to the other application. Apple introduced OS X for its personal computers in 2001, but pieces of the system trace their roots back to the 1980s, when they were used in the operating software of computers made by Jobs's other computer company, NeXT. Palm sees an opportunity to come out with something newer, better and—perhaps most impressive to gadget geeks—faster. A lot faster. "We're already four times faster than the iPhone, and we're still optimizing," McNamee boasts.

So how good is the Pre? The design of the hardware is wonderful. The phone is smooth and sleek, with rounded edges and a 3.1-inch (diagonal) multitouch screen that lets you pinch and slide objects the way you do on an iPhone. (The iPhone's screen is slightly bigger, at 3.5 inches, diagonal.) There's also a QWERTY keyboard that slides out from underneath. You can make phone calls without ever opening the slider, and in that closed position the phone is 2.3 inches wide, 4 inches long and two thirds of an inch thick. It feels small in your hand, and it's easy to carry in a pocket, weighing just under 5 ounces. Palm hopes the small footprint (and nice touches like a thin leather carrying case) will be appealing to people who have been intimidated by smartphones like the iPhone and the BlackBerry.

Under the hood is a speedy new microprocessor from Texas Instruments that runs videos quickly and smoothly, with less of the herky-jerkiness that mobile devices are known for. The phone has 8 gigabytes of storage, which is decent but not great; it can run Adobe Flash, and can cut, copy and paste, which iPhone can't; it supports multimedia messaging service (MMS) so you can send text messages with photos attached, which iPhone can't do; it has a 3 megapixel camera and a flash, which iPhone lacks. There's a button that lets you buy music from Amazon's download store. Then there's the multitasking. Want to talk on the speakerphone while browsing the Web and entering stuff in your calendar? No problem. Palm expects people will keep 15 to 20 applications open at the same time.