Palm strengthens ties with Asian operators

In a bid to replicate the Treo’s U.S. success in Asia, Palm has reworked its distribution strategy, betting that closer ties with Asian operators will translate into higher smart-phone sales in the region.

“We need to replicate the momentum we have in the U.S. in other parts of the world,” said Paul Blinkhorn, Palm’s vice president for Asia-Pacific, during a recent news conference held to announce the company’s Treo 750v smart phone.

The Treo line of smart phones represents the bulk of Palm’s business, accounting for $269 million of the $356 million in revenue earned during the company’s fourth quarter, which ended Aug. 31. Palm shipped 623,000 smart phones during the period

While Palm does not break out smart-phone revenue by geographical region, the bulk of the company’s overall revenue comes from the U.S., according to a company filing with the U.S. Securities and Exchange Commission. International sales accounted for 17 percent of Palm’s worldwide revenue during the last quarter, down from 25 percent during the same period one year ago.

“The success of our business strategy and our smart phone products is highly dependent on our ability to establish new relationships and build on our existing relationships with domestic and international wireless carriers,” the filing said.

Palm’s recent announcement of the Treo 750v, a Windows-based 3G (third generation) smart phone that went on sale in Singapore this month through operator MobileOne, is part of a wider deal with Vodafone Group and an important step for Palm. “It’s the first major exercise with a carrier outside the United States,” Blinkhorn said in an interview.

The relationships that Palm has built with U.S. operators, like Verizon Wireless, have been critical to the Treo’s success in that market. This strategy has been successful because operators can subsidize the device and bundle it with their high-speed networks, Blinkhorn said, adding Palm hopes to repeat that success in Asia through its partnership with Vodafone, which also covers Europe.

“Here in Asia-Pacific, we have moved from, and are continuing to move from, a broad-based distribution model … to a stronger focus on working with specific carriers,” Blinkhorn said, noting that Palm is in talks with Vodafone and its partners in several Asian countries to release the 750v in those markets.

But there is one Asian market that will not be getting the 750v any time soon: China. Vodafone’s Chinese partner is China Mobile Communications, the country’s largest operator, but the absence of 3G licenses there prevents Palm and China Mobile from offering the 750v.

“China Mobile is a slightly complicated matter and the complication is that legally you can’t sell a 3G product into China at this particular point in time,” Blinkhorn said, noting that regulation will likely remain in place until the government issues 3G licenses.