Palm: The horror of being in third place

Jack Welch once said that a company is screwed if it is not No.1 or No. 2 in the business. Have a look at smartphone company Palm (NASDAQ: PALM), which is getting closer by the day to going out of business. It sits behind two remarkable companies: Apple (NASDAQ: AAPL) and Research in Motion (NASDAQ: RIMM). Those two firms have innovative products and loads of loyal consumer and business customers.

Yesterday, Palm cut its revenue forecasts by a breathtaking sum. For its quarter ending in November, the company said revenue would be between $190 million and $195 million. Wall Street had expected $331 million.

Palm blamed the economy, but that is not really fair because its competitors, which operate in the same economy, will not miss their numbers by nearly as much, if they miss them at all. The reality is that Palm has had a series of unappealing products and its next-generation handset and OS will not be out until next year. Palm does not have the balance sheet to build and market a broad range of products so it is a "one bet" company. Its 2009 launch either works, or the company goes under.

Palm may be deviled by the recession, but years of bad management have come close to burying it by keeping the company a distant third in the high-end smartphone business.

Douglas A. McIntyre is an editor at 247wallst.com.