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Palm Preliminary Earnings Show Pre Or Die

Gordon Kelly

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Palm Preliminary Earnings Show Pre Or Die

There's a certain irony that the announcement of a product designed to save the company is actually killing it - at least in the short term...

Everyone's favourite zero to hero company Palm is suffering this week. The smartphone manufacturer has announced preliminary results for its third quarter of fiscal year 2009 and they're bad - like really bad, like really really bad.

Revenues for the period will range between just $85m and $90m, heavily down on the same period a year ago with expenses for the quarter eclipsing these figures entirely at between $95m and $100m. To put this into perspective, Palm admits the "company's cash, cash equivalents and short-term investments balance" (essentially the whole business's worth) will consequently be just $215m to $200m - a value which could be swallowed in less than a year.

Ironically, Palm knows a big factor why: the Pre.

"The revenue declines vs. the company's second quarter of fiscal year 2009 and third quarter of fiscal year 2008 are the result of reduced demand for Palm's maturing legacy smartphone products," admitted the company which knows no-one wants to buy a Centro or a Treo Pro having seen this wonder phone unveiled at CES.

"The much-anticipated launch of the Palm Pre remains on track for the first half of calendar year 2009, but as expected we've got a difficult transition period to work through," agreed Palm President and CEO Ed Colligan. "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 re-establish Palm as the leading innovator in the growing smartphone market."

The short term solution sees Palm chasing yet more funds which could be attained by "remarketing of a portion of the common shares underlying the Series C preferred stock and warrant units owned by Elevation Partners."

If there is an upside amid the financial turmoil it is this: my first impressions were mind blowing and we all want the Pre available as soon as possible. Now the very future of Palm depends on this remarkable handset not being late...

Update 10.03.09: As if to emphasise the severity of the situation Palm has now commenced a stock resale plan to generate funds. Palm astutely repurchased large quantities of its shares prior to the Pre launch and is now selling $49m worth for their current value of $83.9m. $49m of that will repay investor Elevation Partners with the remaining $34.9m expected to keep the company going until the Pre hits - hopefully sooner rather than later...

Link:

Press Release

MSIC

March 4, 2009, 12:20 pm

If you were going to bet the farm on anything...

Moche

March 4, 2009, 2:48 pm

I think the headline should have been Pre, Die or Buy, but it doesn't quite fit as the last one should be Bought. I think the Pre would have to be a mammoth iPhone crushing, cash-cow for Palm to avoid being bought this year.





I don't know why it hasn't happened already? Perhaps prospective buyers are waiting to see how Pre actually goes down in the market place before stumping-up.





Whatever happens there will be some cash heavy company out there looking to pick-up Palm's hard work at a knock down price before too long. MS? Maybe, if they are willing to chuck in their own R&D on Windows Phone. I guess alot also rides on how well Android does this year too.

YT

March 5, 2009, 6:20 am

Gordon Kelly: Do your homework or at least think it out before swallowing damage control spin!





This: "The revenue declines vs. the company's second quarter of fiscal year 2009 and third quarter of fiscal year 2008 are the result of reduced demand for Palm's maturing legacy smartphone products," admitted the company which knows no-one wants to buy a Centro or a Treo Pro having seen this wonder phone unveiled at CES. "





Centro was already expected to be exhausted. Almost all the revenue predictions were for Palm Treo 800w, Palm Treo Pro GSM, and Palm Pro CDMA.





The abject failure of the 800w, launched in July with the infamy of being the fastest discontinued Palm ever, had nothing to do with Pre. The abject failure of the Treo Pro GSM to get a carrier had nothing to do with Pre. The phone was launcnehd in September 08, carrier negotiatiosn would have been in early summer 08. Nothing to do with Pre there eitehr. The long delays on the Treo Pro in CDMA had to do with trying to clear out 800w stock and programming errors when Palm made HTC stick in a new MS broswer that further delayed it. Nothing to do with Pre there.





These were the heavyweight revenue streams for the last quarter -- 800w, Tre Pro GSM, Treo Pro CDMA -- and their low revenue had zero, ZERO to do with Pre.





I am not a Palm hater. I hope Pre does well and I think it will. As WM user because of work, who bought the 800w on release and which was trashed by buyers and for good reason, and who waited for the Pro while it was delayed with endless problems and the fact that it FAILED sprint testing several times (you can see form FCC they planned ot bring it out in December) I have to say you got this very wrong.





Palms next quarter will be worse because of Pre and the screw ups with the last three launches, this past quarter was all about the Treo products thmeselves.

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