Palm Reports Quarterly Record High 738,000 Treo Unit Sales & Revenues
Exceeding analyst expectations and to my delight, Palm this past Thursday reported record revenue of $410.5 million in the third quarter of fiscal year 2007 ended March 2 while Treo smartphone sell-through for the period reached a company record high totaling 738,000 units, up 30 percent year over year and up 20 percent sequentially.
Palm CEO Ed Colligan noted in a conference call that “Our business fundamentals remain strong”:
- Treo smartphone sell-through this quarter broke record numbers (see chart below);
- Smartphone revenue reached a record high of 354 million dollars for the quarter, up 23% year over year and 25% over the previous quarter;
- The international portion of the business is making significant gains with Treo smartphone revenue more than double that of a year ago
- Last quarter the company shipped 2 new smartphone platforms and it has a total of 4 differentiated smartphones in production;
- Our cash management was excellent, our own and our channel inventory has been managed exceptionally, and our balance sheet continues to remain strong.
These results reflect the underlying strength of our business as we continue to create compelling products, and drive end-user demand.
Aside from the fact that Ed Colligan confirmed that Palm has four new Treo smartphones in production (some analysts point at a May announcement) as well as “a new product” developed by Jeff Hawkins (see recent Palm News) I was particularly interested and excited by what he had to say about his company’s new product design strategy:
“As you may know, we are a platform company at heart. We have a long history of building and leveraging core platforms from both a hardware and software perspective. Today we are designing hardware reference platforms that will allow us to increase the range of our products and bring new products to market faster than we’ve ever done before. With common hardware architectures and components, we’ll be able to deliver products with different operating systems, form factors or radio technologies while reducing the complexity of the product and the number of its components.
These efforts should shorten product cycles, increase the breadth of our line, lower costs and increase reliability and quality. These new initiatives differ from our earlier design practices where we focused on the serial development of an individual product design with a dedicated ODM partner. This limited our ability to spin off differentiated products from the same design. While this approach is not uncommon when you’re defining a new product category, now that we understand the core design elements more clearly, we can leverage a platform design to create more efficiency and scale.
These platform efforts in the company are focused on the hardware side, but we also continue to invest in both Windows Mobile and Palm OS platforms on the software side to ensure that we give our customers, both carrier partners and end users, the broadest range of possible solutions available on the market.”
I am pretty convinced that the above statement means that Palm will pursue a product design strategy similar to RIM that will allow it to offer very distinct future Treo smartphone models – for example variations with no keyboard, a larger keyboard, no touchscreen, a smaller display and many other options – which will let the company target a wider audience and finally break free from the (ageing but successful) form-factor constraints it has faced to date.
Colligan also noted that he will provide a broader picture of the company’s goals for the future and give an in-depth view of how Palm’s team will execute on its plans to achieve those goals in an upcoming Investor Day in New York on Tuesday, April 10. I’ll be very curious to hear more on this front…
Finally, when asked about the continued (misleading) speculation of a buyout he reiterated that “Palm is focused on operating a stand-alone company. The right thing to do is to focus on growth [as] the long-term opportunity is quite a bit bigger than what we are dealing with today. We’re just scratching the surface”. CFO Andy Brown also added that “We are 100% focused on running an independent supplier of mobile computing products into the marketplace. End of story”.
I am naturally delighted to hear that Palm intends to remain independent (see Palm & Treo: Everyone Wants A Slice) and to see how it continues to forge ahead more strongly each quarter strengthening and consolidating its leading position in the smartphone space – something which I personally believe it will continue to do extremely well for many years to come bringing the Treo experience closer to millions more worldwide.
Treonauts always set new records… 
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Comments
It's so funny that you forget to mention that net profits plummeted, as well as the fact that Palm is not growing nearly as fast as the market, making it an underperformer with regards to its peers.
In recent years, Palm dropped from being a marketleader into a nicheplayer with around 5% market share. What do you mean with only showing good news propaganda with this posting?
Tyler - thanks for bringing this up. I was actually extremely upset to see various reports of Palm's "drop in profits" principally because this was done on a year-over-year basis and to the exception of one or two articles on the subject people _completely_ failed to mention that this profit drop was due to Palm's significantly increased _investment_ in both R&D + marketing which are likely to yield significant returns in the future. Profits were not down significantly on a quarter-over-quarter basis and pretty much all analysts further reported that Palm exceeded estimates for the period. I am not particularly concerned with the company's financials and much more interested in the continued Treo sell-through and future developments. Palm is anything but a niche player in the smartphone space.
Cheers, A.
The "four differentiated smartphones in production" are the existing Treos (700w, 700p, 680, 750). That wasn't a preannouncement of upcoming models.
Michael - yes, my mistake. However, I do believe that aside from the current four existing platforms that you point out Palm also has four other differentiated smartphones in 'development' for release during 2007.
Cheers, A.
Andrew, Andrew, Andrew...
1.) You are "not particularly concerned with the company's financials"?!?!
So... how can you possibly provide responsible coverage of the company?
2.) You "believe that aside from the current four existing platforms... Palm also has four other differentiated smartphones in 'development' for release during 2007"?!?!
So... you're asserting that Palm will release FOUR new smartphones within the next nine months? Based on what evidence?
You're losing credibility left and right, dude.
"I was actually extremely upset to see various reports of Palm's "drop in profits" principally because this was done on a year-over-year basis"- Andrew
Tsk, tsk, too bad, so sad.
WAKE UP! That is how financials are compared, because it eliminates seasonal variabilities that occur cyclically when looking at consecutive periods.
stop being such a pawn of Palm
John,
1. I am not particularly concerned with Palm's financials because they continue to be very strong and nobody questions them. With over $500 million in cash, excellent cash flow, growing gross margins and others the company is perfectly prepared to invest in its future growth.
2. The Treo 755 and Hawkins' "new product" are already two of the four that I see released this year... For the rest we'll just have to wait and see but I certainly don't expect to be disapppointed on this front.
Cheers, A.
"As you may know, we are a platform company at heart. We have a long history of building and leveraging core platforms from both a hardware and software perspective. Today we are designing hardware reference platforms that will allow us to increase the range of our products and bring new products to market faster than we’ve ever done before. With common hardware architectures and components, we’ll be able to deliver products with different operating systems, form factors or radio technologies while reducing the complexity of the product and the number of its components."- Colligan
TRANSLATION:
"We are running out of ideas, and don't have the ambition, inspiration, or wherewithal to create any compelling new products, so we have figured out a way to recycle our old designs and fool a good portion of consumers that haven't bought our products before."
REALITY:
Colligan is not telling the truth when he describes Palm as a "platform company at heart". If it were true, Palm would not have spun out its only unique asset, its operating system, as a divestment. Second, riding on coattails of Microsoft Windows just flies in the face of this farcical statement.
Palm is nothing but a ghost-- Colligan claims the hardware is Palm's "platform", the reailty is that it is just another phone that happens to include a full keyboard on it. News flash! that was old four years ago, and Palm is treading water.
Selling the company is a last gasp, it's all downhill for Palm from here.
Palm's R&D expense is escalating because they either failed to invest enough in R&D earlier, and because they have been continuously sliding behind the rest of the industry.
Palm's sloth-like product development forced them to adopt a competing operating system instead of continue to innovate, develop and refine their own system.
Competing phones are already faster, slimmer, cooler, better and more affordable.
The Apple iPhone will help Palm sell a few more phones, by bringing attention to this product niche, but after that Palm is going to coninue to be further and further eclipsed by its competition.
First-time buyers attracted to Palm's current marketing campaign are not likely to continue to support the company, because after experiencing the flaws and bugs in Palm products, they will be likely to switch to newer, more advanced, better designed products that are becoming more and more ubiquitous.
It's unfortunate, because many of us have been hoping for Palm to stop sucking for several years now, and Palm just keeps on insisting on failing to stay current with the needs of its users.
People have been sounding the death nell for Palm for years and yet they're selling more Treo's than ever. Everyone has a bigger and better device coming out, all are Treo killers but the Treo's form factor and overall design is still the best. We'll see who has the last laugh :o)
Famous last words:
"People have been sounding the death nell for Palm for years and yet they're selling more Treo's than ever. Everyone has a bigger and better device coming out, all are Treo killers but the Treo's form factor and overall design is still the best. We'll see who has the last laugh :o)"
\"“As you may know, we are a platform company at heart.\" Ed Colligan.
Oh? Pardon me, but if Palm is a \"platform company\", WHERE IS THE UPGRADE for my TREO 650???
buggy, feature-poor, outdated, and in serious need of improvement.
and, no, I will not be buying another Palm if the company can\'t support its users.
Andrew,
Another great post as usual. One quick follow-up question: during the conference call, Palm disclosed that it made two acqusitions for a total around $20 million during the quarter. I am guessing that one of the two was Chatter Mail. Any idea what the other one was?
i'm thinking of getting a 700p. would there be a reason (or reasons) to wait? i don't currently have a treo and am thinking of taking the plunge. thx!
"...h? Pardon me, but if Palm is a \"platform company\", WHERE IS THE UPGRADE for my TREO 650???..."
Hell, where, for that matter, is the upgrade to the Treo 600? The 650 wasn't much of a bump from there... So that's four years without an appreciable upgrade.
Hello, Ma Bell, could I have one of them there TouchTone phones in something other than black puhlease?
T600 would need more than software upgrade, so I don't see much sense in such operation. However I admit T650/T680/T700 could get a fresher soul.
Just wondering: Do they give any kind of breakdown as to how the sales of PalmOS (ahem...GarnetOS) devices vrs. WinMo devices are doing?
Stephen - analysts estimate that Windows Mobile currently accounts for 20-25% and PalmOS for 75-80% of total Treo smartphone sales.
Cheers, A.
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