Palm: revenues up, expectations down
'Deeply disappointing'
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Despite a surge in sales, Palm CFO Doug Jeffries predicts that the smartphone maker's immediate future won't be a happy one.
These revelations came today in a conference call with analysts and reporters as Palm announced its third-quarter results for fiscal year 2010. Wall Street immediately spanked the company's stock in after-hours trading, driving it down over 12 per cent.
Compared with the same quarter one year ago, Palm's balance sheet looks almost rosy. At that time, the company endured a $95m net loss on revenues of a mere $90m. This year, net losses totalled just $18.5m on $349.9m in revenues. Revenues, in fact, beat both analysts' expectations and Palm's own projections.
But losses are, after all, losses. CEO Jon Rubinstein candidly told those listening in on the call that issues with his company have been "deeply disappointing to me".
Jeffries had the unenviable task of announcing that next quarter should be a rocky one, with revenues projected to be $150m or less. According to the Wall Street Journal (paid subscription), analysts were expecting fourth-quarter revenues to edge a bit over $300m.
When asked about the roiling speculation that Palm might be a takeover target, Rubenstein dodged the question, giving only the time-honored and prudent comment that the company would entertain any ""reasonable offer".
Palm is in a tough position. Its webOS operating system - especially in its latest incarnation - is attractive and well-featured. The company's Prē and Pixi smartphones, however, have failed to gain traction against the juggernaut that is the Apple iPhone and the steadily increasing competition from phones based on Google's Android OS.
If you're interested in some solid smartphone intellectual property, now might be a good time to give Rubenstein a call. Or, perhaps, you might choose to wait until after what's shaping up to be a challenging fourth fiscal quarter for Palm. ®
COMMENTS
WebOS is great..
WebOS is great.. but who needs it?
WebOS came at least a year too late to compete with the iPhone, but development took so long that Palm missed the opportunity of using Android instead.
So, now Palm have bet the barn on a proprietary OS that has launched into an exceptionally tough market where is has to compete against not only the iPhone and Android, but also a revamped Symbian, Samsung's new Bada platform, the upcoming MeeGo OS (the merged Maemo-Moblin platform), and then there's Windows Mobile, LiMo, ACCESS and more.
I'd love to see Palm survive, I really think that they won't. A shame if they vanish.
The market is brutal
So the market is brutal. VC's, the carriers and Jon Rubinstein have been lucky enough to live their dream for a couple of years.
The crippling blow for Palm is that they sold 900,000 phones, but end users bought only 400,000. Adding in opening inventory, the channel is stuffed with product to last at least 4 months, probably 6-12 as sales taper off. Palm needs to live on life support for another couple of years if it is to live. It's not so bad; Apple had to put the last Lisa production into a landfill, despite being the forerunner of every Windows and Mac PC in the world. Apple had to slog away selling beastly OS8 and 9 Macs for years while OS X developed. And look how many years Microsoft has to keep things like search, Xbox, Zune etc. on life support in the hope they will grow enough to support the company in its dotage.
WebOS got a free pass to the market with the unsatisifed demand created at other carriers by Apple with its AT&T exclusive. Now that demand can also be served by Android, Microsoft Windows Phone 7 Series, and maybe even iPhone. Carriers are never going to order enough volume of the next Palm product to drive economies of scale.
Big lesson for Rubinstein: "monkey see, monkey do" won't turn you into the alpha male. You can't take a shortcut to an established market; it'll gobble you up and spit you out. Steve Jobs took twenty years of successive development and repositioning of the underlying engineering to achieve iPhone (including a reverse takeover of Apple by Next). iPhone was launched at the earliest moment it was technologically doable, and it was positioned far away from existing products.
WebOs is clever - but lots of faults outstanding for uk users
I've been using a Palm Pre for the last few months and whilst I love the smooth multi-tasking it fails in one extremely important area. It keeps dropping off the network into a well known "Phone Offline" mode because of some bug sync'ing email to the phone. quite how that affects voice calls I do not know.
The multiple OS updates have improved the system considerably but are so US-focussed that EU 3G/GSM users often find strange bugs. UK users don't have access to the paid-for apps so all you get are the often useless free "fart-apps". the folks who has WebOS-doctored their phones are finding massive problems when updates are sent out by o2.
However, on the other hand, it syncs with my kontact (linux) calendar which few other phones have!
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