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Pricey Tungsten T prompts Palm sales slide

Should have known all along

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Palm's current quarterly sales will be $25-40 million less than it had hoped, the PDA maker admitted to shareholders today.

Last quarter, Palm predicted Q3 2003 revenues of $230-250 million. Now its expecting just $205-210 million, a dip of between 11 and 16 per cent.

Palm blamed the shortfall on diminishing demand for its top-end Tungsten T PDA. Slick but expensive, the Tungsten proved popular last quarter, leading to high expectations for the current three-month period. But post-Christmas sales proved disappointing, despite remedial price cuts last month.

Even allowing for slight dips in demand for its other PDAs - Palm says sales of its low-end and mid-range models remains within expectations - and other expenses, including the $2.7 million settlement of two unnamed "legal matters", the revenue shortfall announced today shows Palm is selling several hundred thousand Tungstens fewer than expected. How come? Enterprises just aren't buying, says Palm.

That doesn't bode well for the recently released $549 Tungsten W smartphone.

And don't forget, Palm had already said it expects to take a $140-145 million hit on the back of its recent layoffs and a write-down of property values.

Praised from the start for its technology and styling, commentators nevertheless unanimously damned the Tungsten T's $499 price as just too high. Ironically, PalmSource's Vice President for Worldwide Licensing, Lamar Potts, told attendees at last May's European Palm Developers Conference that the company's own research showed limited demand for PDAs priced $499 and up. Potts was thinking of PocketPC devices, yet less than six months later Palm had itself released a $499 device.

Today's announcement suggests that Palm really start listening to its own executives. ®

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