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Palm Pre Key To Company Survival

Palm Reports Over 70% Drop In Revenues – Company Survival Now Hinges Entirely On Succesful Pre Launch

Palm-Pre-Survival-1

Palm yesterday pre-announced that its revenues for the third quarter of fiscal year 2009 will be in the range of $85 million to $90 million – a drop of more than 70% over the same period last year when it reported sales of $312.4 million.

Wall Street analysts were somewhat shocked by the news as they were expecting sales of some $158 million for the period – Palm stock naturally suffered a drop in after-hours trading as a result.

Palm attributed the sharper-than-expected revenue decline to maturing legacy smartphone products (Palm basically has no new smartphones to sell), the challenging economic environment and the delayed release of the Sprint Treo Pro in the United States.  Palm expects additional declining revenues and continued margin pressure from its legacy product lines in the fiscal fourth quarter.

The only silver lining on Palm’s revenue horizon is the hugely anticipated Palm Pre smartphone which CEO Ed Colligan reiterated “remains on track for [release] the first half of calendar year 2009”.  He added that: "Despite the challenging market environment, the extraordinary response to the Palm Pre and the new Palm webOS reaffirms our confidence in our long-term prospects and our ability to reestablish Palm as the leading innovator in the growing smartphone market."

Palm also acknowledged that cash used in operations for the quarter is expected to be between $95–$100 million while the company’s overall cash, cash equivalents and short-term investments balance is expected to be $215–$220 million at the end of the quarter.  While Palm stated that it believes that “it has sufficient cash to meet its working capital needs under its current operating plan, the company intends to strengthen its working capital position given the challenging economic environment and the opportunity to drive both the launch of the Palm Pre and future product-development efforts” – Palm will basically shortly seek to raise more cash.

Overall I have to admit that none of the above comes as much as a surprise although it is evidently extremely disappointing to see Palm dropping to such lows.  Having said this, the optimism and excitement surrounding the forthcoming release of the Palm Pre within the next three or four months nonetheless keeps many upbeat about the long-term prospects not only for Palm’s survival but a complete and rather overdue revival.

Treonauts are always upbeat


Posted by Andrew on March 4, 2009 at 10:03 AM

Palm News

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Comments

1
by proee | Mar 4, 2009 12:22:23 PM

Palm may have a huge hill yet to climb when Apple undoubtedly releases a new generation of iPhones. If you follow the success of the ipod, they've managed to make significant improvements to the device on every release. This would lead me to believe the new iPhone that's coming down the pipe will be quite impressive - enough to maybe cool down the release of the Pre and make the adoption rate small. The iphone has been out for some time now, so they've had a lot of time to pump out a new version with some amazing features...

2
by Titus Purdin | Mar 4, 2009 1:50:42 PM

I am a long standing Treo supporter and fan. I started out
with Palm PDA's and have been through 4 Treo phones. I have
written numerous programs to run on my Treo's and appreciate
that I can do so. So what is this with 'Sprint only'? I
have been a long time ATT user. Does that make Treo a dead
end for me? It kind of seems so.

I would love to see Treo survive and thrive. But I am having
a difficult time seeing where power users like myself fit
into the business plan.

Titus sends

3
by Dan | Mar 4, 2009 6:52:43 PM

I am not sure how the dates for the financial quarter correspond to the PRE news - but you have to wonder who would buy a Palm now that they have announced they are introducing a completely new technology platform. Sure, they may produce some more Palm OS devices - but the handwriting (or Graffiti) is on the wall. Perhaps if they had done a little more in terms of backward compatibility, they could have held on to existing Palm users who needed an upgrade. Personally, I consider this "not a Palm" - so what do I care, really? I will evaluate it against my other alternatives - but it holds no special attraction just because it has a Palm logo.

4
by Chris M. | Mar 4, 2009 8:32:44 PM

I love Palm's products, and I can't wait to get an unlocked GSM Pre. I hate to say it though, if their survival depends on Sprint's sales of the Pre, goodbye Palm. They're depending on a company that's also dying. They'd better cancel that exclusive deal as soon as possible.

5
by dgarts | Mar 5, 2009 8:56:29 AM

Hmmm, down from YoY sales, eh?

A year ago Centros were flying off the shelves at $99 to become the most successful release sale product Palm ever posted.

Repeating that would be easy - price the Pre reasonably.
Maximum $200 and they'll eclipse the Centro numbers, economy notwithstanding. The prosumer has been waiting for this kind of thing for so long, too long.

$250 - $300 and it will limp to survive.

>$300, forgetabadit, thanks for the memories, g'bye.

>$350, forget it. Kiss this company goodbye.

6
by melcrose | Mar 5, 2009 10:14:30 PM

Will I switch from my 755p?

Is the software that I've purchased (much $$$!) compatible?

Will the four 8GB cards (filled with music and movies and games) work in the Pre?

Is it available in my market? (Verizon?)

NO.
NO.
NO.

Will I switch? duh.
NO.

7
by PalmNut | Mar 6, 2009 5:12:21 AM

It is clear from the many posts that there is a lot to be disappointed about in Palm. However, if you look at it from another perspective:

1. The Treo Pro finally has a US carrier so if people actually like Windows Mobile, Palm has a great option for them. And, the Pro's release date is this month!

2. The Pre and WebOS are still getting hyped as the true iPhone killer. The iPhone will release new phones this summer (they are on a yearly refresh cycle) but if I recall correctly, at the Pre announcement in January, Palm hinted to other models coming out with WebOS.

The future is bright for Palm. They just have to release the Pre by June. There will be another bad quarter because, other than the Treo Pro out, there is not a lot of Palm options to choose from. But, after this quarter, and as soon as they release the Pre on other carriers, the stock is going to take off and Palm will be back in business - or someone (HP or Dell) will try to buy them out.

8
by Jay | Mar 7, 2009 1:20:56 PM

I think microsoft should attempt to buy them out. as they attempted last year to do with yahoo. then they could somehow mesh the Zune with webOS to create something that offers the type structure found for the iphone.

9
by Targon | Mar 9, 2009 8:23:01 AM

Once the Pre is available in an unlocked or even an AT&T GSM flavor, the phone will be selling VERY well. That may be a part of the delay, to get enough of them ready to meet even 85 percent of the demand that is out there.

When it comes to the iPhone, there is no question that many people really prefer a real keyboard instead of a touch-screen keyboard. Yes, there will always be those who feel the touch screen is "cooler", but those are also not necessarily the target market. The Pre is not going after the "gadget market" as much as the people who use their phone for both personal AND business. The iPhone is more for personal, with reasons for the business crowd to avoid it.

10
by epic PALM fail | Mar 9, 2009 9:16:32 PM

Bono/U2 is a major investor in Palm (via Elevation Partners, which owns 39% of Palm)...

and RIM BlacBerry is SPONSOR of U2 2009 Tour!!!


epic PALM fail

11
by Targon | Mar 10, 2009 8:20:45 AM

epic, that just goes to show that while RIM is putting money into the U2 tour, Bono likes Palm. If anything, it just goes to show that money isn't everything.

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