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