Palm is in hot water and some of its customers are steamed.
Despite misleading customers as to how many colors its m130 organizer actually displayed, the company said Monday it had no plans to reimburse customers for its error. To the dismay of many Palm owners, it didn't even issue an apology on its website.
"OK, I don't own an m130 so I'm not gonna complain," posted "Joe" on the Palm Infocenter message board. "But I will say, 'Why on earth didn't Palm post an apology letter on their website?' Can someone explain this to me?"
Owners of Palm's other color-screened products, the m505 and m515, questioned whether they really had 16-bit PDAs capable of displaying the 65,536 colors Palm promises. Palm insists that they do.
Nonetheless, Palm owners in general expressed disgust with the company.
"Palm needs to do the right thing here," posted another person on Palm Infocenter. "This was false advertising. Customers were told they were buying X and they got Y. Screw your customers and they will eventually screw you."
Hewlett-Packard faced a similar predicament two years ago when it admitted that it offered fewer than the 65,000 colors it promised for its Jornada handheld computer. The company offered refunds to its customers.
But Palm doesn't have as much breathing room, industry analysts say.
If the company doesn't compensate m130 owners, it runs the risk of "alienating their base," says Todd Kort, analyst for Gartner Dataquest.
On the other hand, Palm is in a "weak financial state" -- not an ideal position to be in to reimburse customers' money, Kort said. "They definitely have a big PR problem on their hands at the very least."
"It is kind of strange how they are trying to walk away from the issue," Kort said. "I don't know if the customers will allow that to be done, or the attorney general of the state of California who might potentially be interested in this. It is definitely false advertising whether it is intentional or unintentional. They need to correct that."
Palm told the media on Monday that its m130 PDA was unable to display the 65,536 colors the company had been advertising since the product was first introduced in March. The company said the handheld supports so-called 16-bit programs, but it can't display the 65,536 colors typical of a 16-bit application.
The m130 actually supports 4,096 colors typical of a 12-bit screen. But by using blending techniques, the company can display 58,621 "color combinations -- approximately 11 percent fewer color combinations than we had originally believed" on the m130 handheld, said Palm spokeswoman Marlene Somsak.
Somsak said the "honest mistake" occurred in the implementation of the various components of the PDA.
But Palm-backers on the Palm Infocenter message boards were weary of Palm's claims. They have heard this one before.
"I thought people should know that it (the m130) is a 12-bit screen, but Palm is using the marketing message, acting like it has a 16-bit screen," said "an0nym0vs" the person who started the debate on whether the m130 was a 16-bit product on the Palm message boards. "It was dishonest of Palm to say that it supports a 16-bit screen."
Kort said the difference between a product with a 12-bit screen and one with a 16-bit screen is significant. The quality of the photographs are much better on a 16-bit screen, but the cost for a product with a 12-bit screen is as much as $45 cheaper. The "honest mistake" could have also taken away some of Palm's competitors' business because customers were led to believe they were receiving a product of similar quality but for less money.
However, Seamus McAteer, an analyst with Zelos Group, says most people won't care about the error, although the company will probably lose credibility among the "geeks." McAteer also said the company's latest faux pas is yet another indicator of the "shoddy marketing and management" plaguing Palm.
"It's indicative of the way the company has been run the last three years since it split from 3Com," McAteer said. "Since they hired (former CEO Carl) Yankowski that place has been a disaster."
As of Monday afternoon, Palm (PALM) shares went up a penny to 71 cents. Three years ago, the stock traded at $57 per share.
