Year of the Tiger 2010
Update – February 26, 2010: read CNBC tech reporter Jim Goldman’s post > Palm’s Major Credibility Problem … read also All Things Digital post by John Paczkowski > Palm Agonistes
February 13, 2010: The following is my response to a reader question about reports of Palm temporarily halting handset production via their OEM partner Foxconn. All Things Digital and Boy Genius Report have the scoop on this story. Last week, Palm short sellers had been hammering the stock () and fomenting rumors of weak product demand. The “shorts” were squeezed (stock went up) on Friday when Palm denied any “demand problem” and clarified that the 2-week production hiatus has been planned for some time, and for good/logical reasons — coincides with the Chinese Lunar Holiday (Year of the Tiger) which begins on February 14, 2010.
Question: “Dan .. Is Palm’s Chinese New Years story a cover up?”
Answer: Good question … Short answer is “I don’t know.” It sounds like Palm’s abrupt production stand-down order was a surprise to Foxconn. I’m not sure I buy into Palm’s party line — “we over-produced in Feb in anticipation of the holiday.” This sudden move smacks of a Palm demand problem.
Palm’s 2-week work stoppage exceeds the official holiday
Palm’s excuse is that the “temporary shutdown” is intended to accommodate China’s New Year holiday. The Lunar New Year in China (Year of the Tiger) is a big deal and it’s understandable that Foxconn’s* production line would come to a halt during the festivities. Yet Palm’s shutdown, for the remainder of the month of February (two-weeks), goes beyond the official 4-day Lunar holiday.
A Palm buyout in the offing?
One might theorize that the Palm production stoppage is due to an impending acquisition by a party that wants to redirect Palm’s current product line … but that’s a charitable (less probable) interpretation. Mark this one as dubious.
Shifting production to another original equipment manufacturer (OEM)?
Foxconn CEO Terry Gou with Lin Chi-ling
Another reason to hit the “production kill-switch” is the possibility that Palm might be planning to shift handset production to another OEM. Foxconn is, after all, not the only low-cost/high volume electronics OEM in Asia. Palm may not like the fact that Apple gets favored son treatment from Foxconn and a shift to another manufacturer might improve Palm’s standing and reduce manufacturing costs. While this transition is possible, I’m adding this one to the highly doubtful category.
An interesting sidebar is that Apple () may be the one to spread out its production to other OEMs. 
While generally happy with Foxconn, Apple knows that they have a bunch of Mac and “i-device” eggs in one basket via Foxconn and they may (just a rumor) have awarded the “next gen” iPhone (iPhone 4G) contract to Pegatron, another Taiwan-owned OEM. Despite Apple’s rumored flirtations with Pegatron, Apple remains committed to Foxconn (Apple’s partner since 1986), and it appears that Hon Hai Precision will be manufacturing the forthcoming iPad.
AT&T and Verizon give Palm paltry orders?
Still another angle to the story is Palm’s supposed saviors — AT&T and Verizon. These two powerhouse carriers have signed on to distribute Palm’s new phones (the Pre, PrePlus and Pixi+) yet this is no assurance that Palm’s line will sell. The carriers need to guesstimate consumer demand (dictated to an extent via carrier promotions or lack thereof) and buy inventory for their own stores. If AT&T and Verizon are not jazzed about Palm’s offerings, they can affect production by ordering a “short” supply (Verizon was rumored to have ordered a paltry 5000 Pixi+ units). Why, you might ask, would AT&T and Verizon diss Palm’s new phones? I can think of 150,000 little reasons (apps not available on Palm products) and three big ones – Android and iPhone and iTunes.
