Palm stock plunges 13% following earnings results 67
Fri, 18 Dec 2009 7:47 pm EST 
While it was Jon Rubinstein’s job to play Palm’s Chief Optimism Officer as well as CEO during yesterday’s financial conference call, analysts and investors alike have picked apart his and CFO Doug Jefferies' comments and don’t like some of what was said. In fact, investors liked it so little that the stock opened Friday trading down more than 10% from Thursday’s pre-conference call close of $11.72. From the opening bell investors never looked back, with Palm closing today’s trading down a stunning 13%. Today marked the first time in nearly eight months since Palm’s share price dropped below $10, though it ended the day at $10.17, a drop of 44% from its 52-week high of $18.09 at the end of September. At one point during the day Palm traded as low as $9.60.
So what drove investors to so desperately sell stock in Palm that they were willing to lob off an eighth of their asking price? Panic. Notably, panic driven by reading into the comments made by Rubinstein and Jefferies. Take this for example:
“We’ve dramatically ramped our TV advertising and online campaign for Pixi throughout the holiday season. Our recent PR activity has been outstanding and as Jon mentioned, we’ll be launching a new broad based Palm marketing campaign later this quarter. We think these combined efforts, among others, will help drive increasing momentum as the year unfolds.”
Palm is doing the advertising here, not the carriers. With the exception of Apple’s iPhone ads, most manufacturers have been content to let the carrier handle the advertising. The fact that Palm is picking up a large portion of the advertising budget for the Pixi (how many Sprint Pixi ads have you seen?) indicates that Sprint’s support for the phone is relatively low. Considering that Pre sales were clearly disappointing to Sprint, it’s little surprise that they aren’t going all-in promoting the Pixi. Palm’s advertising expenditures for the last quarter were up $18 million.
And of course there’s the continued losing of money. It’s little surprise that Palm continues to hemorrhage cash, at least if you look at it from GAAP accounting numbers. GAAP requires that smartphone manufacturers who provide significant services for the device (e.g. updates, app stores, music sales, etc) defer the revenue from the device over the expected lifetime of the device. In Palm’s case, that means they need to take the money taken in from Pre and Pixi sales and split it up over two years, even though they have and can spend the money from the sales right now.
So while Palm shipped more phones than expected, they also spend more money than was expected, reporting a loss of $0.37/share, as opposed to analysts consensus estimates of a $0.32/share loss. That equals a loss of $60 million, as compared to a loss of $14 million last quarter. Even with the losses, Palm has cash and short-term-investments totaling $590 million, an increase from $378 million at the start of the quarter. A good portion of the cash gain came from the $500 million secondary stock offering, of which it seems a good portion has already been spent.
Moving forward, Palm’s numbers will comparatively be different, as GAAP accounting practices have changed to place more of the revenue from smartphone sales at the time of sale, though a portion will still be deferred over the life of the device.
Jefferies also said that the coming quarter (ending in February 2010) may not be all roses either, as Palm plans to “invest aggressively to support [their] expanding business.” Palm also expects to meet revenue goals of $1.6-$1.8 billion in 2010, though those numbers are contingent upon strong execution from carriers, which is translated to mean competitive subsidization pricing and expanded advertising. If Palm can reach these sales goals they expect to achieve both positive cash flow and profitability by the end of the year.
More troubling to Palm investors, however, may have been the Research in Motion fiscal results, released at the same time as Palm’s. While Palm did show a marked improvement from this quarter last year, RIM surged ahead more than most analysts expected. RIM was able to dramatically expand their international sales outside of their home markets of Canada and the United States. They also enjoyed a revenue increase of 59% and shipped 10.1 million handsets, which is 500,000 more than analysts expected. RIM also forecasted increased sales and revenue in the coming year, painting a far rosier picture than Palm. As a result, shares of RIMM ended the day up more than 10%.
What we have here is the tale of two companies. Both were expected to deliver results that were on par with analyst expectations, which themselves were not that high. Both exceeded, but only one blew the numbers out of the water. The continued success of RIM and Apple seems to indicate that smartphone sales are immune to the current global economic climate, and that Palm’s continued comparative floundering is the exception, not the norm.
Do we expect Palm to do better in the future? Yes, but unlike RIM and Apple, Palm is going to need major support from their carrier partners to get it done.
67 Comments
For CES'10, they better have something *reeeaaal* snappy, jack!
Cue iPhone trolls
Sure would be nice if this site would only post positive news stories.. Stuff like this is depressing and uncalled for!
So stick your head in the sand, and ignore the hard facts.
You completely miss the point.. this is supposed to be a fan site for the Pre/WebOS.. not a place to come read all the negative news you can find on the product..
So fans should only care about when good things happen and ignore the bad? I would have figured Palm fans would care *more* if Palm is screwing up...
All this negative news has my eyes wondering over at Android. Seriously, if Palm does not get this right soon, we all will not be buying a Palm phone again. It is good to know what is going on: good and bad.
No. PreCentral is not a fan site. It's a webOS community and news site. Good or bad, if we think it's worth reporting we'll report it.
If you think it's worth discussing, go right ahead. If not, then don't. But don't think just because we like Palm doesn't mean we won't write articles about bad things that have happened to Palm, that people have said about Palm, or that Palm has done. Good news isn't the only thing that's relevant - if anything bad news is more relevant than good. If everything's all hunky dory in Sunnyvale then there's nothing to talk about. And while we would love for all to be peace and love, it ain't gonna happen anytime soon.
Tak a look at Apple. They're arguably the best-run and best-positioned company in the smartphone game. They've got enough cash-on-hand to buy Palm ten times over. They've sold tens of millions of iPhones and will do so again next summer when version 4 is released. But they have problems too, and the fans and fanatics alike discuss them.
Ignoring problems never makes anything better. There are so many events over the history of man that we can point to as the result of ignoring the problem. World War II, 9/11, Hurricane Katrina, and so forth. While Palm's problems will never result in nearly the destruction of life and property as wars and disasters have, if ignored their problems could affect the lives of their customers and the wealth of shareholders. Thusly, the problems are worth reporting.
We don't like bad news, but it's our duty to report it.
+1
A sensible post. This is the reporting of facts. There is NOTHING wrong with it. The VERY SECOND this site becomes a bury their head in the sand site i have no use for it other then to occasionally checkout the homebrew section. And i don't really want that.
Perhaps more to volcam's liking www.morekoolaidplease.com/palm
This isn't apple, we don't like stuff just because it's the fashionable thing to do.
Derek,
While I agree with your reply, I think the picture for Palm is not as simplistic as the investor response to their 2nd quarter earnings may indicate. As stated in my other article below, Palm did exceed the analysts revenue expectations by posting revenues of $302 million as opposed to the expected revenue of $266.2. But of greater significance is the fact that the 2nd quarter included only 2 weeks of Pixi sales; and also the fact that Palm had given a lower guidance for their 2nd quarter performance.
But if you look at Palm's performance, the fact that Palm has done exceptionally well selling "most likely" close to 1 million Palm Pre phones at Sprint in six month is big news - considering their poor advertising. Palm is clearly competing with RIM's BlackBerry phones at Sprint, and yet Palm is generating sales of a projected 2 million phones at Sprint per year, which is significant, especially without factoring in the Pixi. So the question is, how is Palm doing - competing against BlackBerry phones at Sprint? The answer is - very good indeed!
Now the 3rd quarter will see Palm moving to Verizon. We can expect better performance from Palm at Verizon because of Verizon's larger customer base, bigger advertising budget, and more sophisticated approach to marketing and adverting. In addition, Palm's main competitor at Verizon will be RIM's BlackBerry phones; and as we have seen at Sprint, Palm has been able to compete well against the BlackBerry phones. So yes, you are right to report the news, good or bad, but a site like PreCentral understands Palm and its business more than most other sources for news. When people are panicking, being misled, or just confused about world events as it pertains to Palm, a little extra perspective on the story can go a long way to help. And many users of Palm products are looking to PreCentral for that extra insight.
Huh. Well put.
Thanks - Vara411. I have posted some more information which you may be interested in reading.
sorry. i disagree. not well put. the second two paragraphs are speculation offered as fact. they did have better revenue but you ignore the fact that sell through is down and that's more important then revenue. Not to mention the phone isn't selling well on bell and even sprints call and subsequent interviews indicate the Pre had a good start but not the savior sprint had hoped for. And you say what's important is how they do against blackberry on sprint. RIMM's overall sales are up so sprint may be too. regardless, Investors are not that narrow as to look only at comparison to one phone on one platform. especially considering they are now selling in on carriers other then sprint. investors care about earnings and their earnings per share declined. "most likely?" that's a made up number. Poor advertising? well that reflects a management that doesn't know what it's doing so you'll always get a stock hit. readers at precentral understand evaluating webos cellphones better but most surely don't know about evaluating a companys, even a cellphone one. I mean the idea that you ignore earnings per share decline in a quarterly earnings report is illogical.
Palm looks good. A good case why investors should think before acting!
Blackmagic01,
I have presented a logical argument for Palm and you have done nothing to counter my claims successfully, and then you made no sense in your accusations. How can you say that my second paragraph is speculation presentated as facts? Surely you understand English and logic. In the second paragraph, I used the words "most likely" and "projected". Do these words seem to you as if I am trying to present my projections as facts? Projections are never fact! But they are a valid form of reasoning. Man you are making yourself look bad by writing without thinking! I hope you will be more careful next time.
Palm's initial guidance for the second quarter was that it would be significantly lower than the first quarter (partly because they were discontinuing all of their PalmOS based phones - which would have a material impact on their second quarter revenue). They have now reiterated that their third and forth quarters would be significantly higher, meeting their earlier 2010 revenue guidance of $1.6 billion to $1.8 billion. So as far as Palm is concerned, they are still on track to meet those projections. No doubt Verizon is factored heavily in Palm's projections for 2010, since Palm has done quite well at Sprint. And Verizon should deliver much more sales because Verizon is about twice the size of Sprint in terms of cell phone customers.
You spoke about sell-through. Sell-through levels could be attributed to a number of factors, including over production resulting in higher channel inventory levels, limited sell-through incentives, marketing, or simply not responding quickly enough to the competition in terms of product pricing. For example, one of Palm's major competitor's smart phones was marketed with a buy one, get one free deal. Making a misstep in a 3 month period is hardly reason to jump off the ship! Investors did that last month with another cell phone company and now they are regretting it. My point is, sell-through can by itself distort an investor's actions if they do not look at the bigger picture. But I know that for some people, no amount of data matters; they invest either based upon their emotions or whether deep-down, they like a certain company or not.
As far as foreign sales are concerned, Palm's biggest competitor pressured some of their foreign partners to meet certain sales level or pay for the phones out of their own pocket. It was widely reported that a Russian distributor lost a lot of money not meeting sales requirements. The same competitor is currently stumbling with the release of their product in China, but over time, they may do well. Palm's strongest market historically has been the U.S., where Sprint has helped them tremendiously. But in 2010, Verizon and then AT&T may be the main companies driving Palm forward, with Sprint still contributing greatly. And as far as the foreign markets are concerned, Palm has not yet introduced the Pixi which is the webOS mass market phone. In the global market, the Pixi - a smart phone, will be competing against the feature phones and dumb phones, which still dominate the global cell phone market. Investors have to be much smarter than reacting to sell-throughs or inventor levels, they should look at the bigger picture.
Alluding to understanding how investors think does not mean anything. Some investors lack the ability to think strategically or wisely. Others just do not understand the industry they are investing in. And worst, some are simply gamblers - using vast sums of money to single handedly drive up or down a company's stocks - these are fools! Palm has reengineered their entire company from the ground up. They have just completed their second quarter, carrying a revolutionary new smart phone product, and have made great strides, while some judgement calls need readjustment. That is the normal ebb and flow of business - and in business, three months definately does not paint a picture.
What is the outlook for Palm in 2010?
Palm's application store called "App Catalog" now has 1,000 applications and is expected to greatly expand in the third quarter. Verizon is training it's staff on the Palm Pixi phone, which as stated was released only two weeks before the close of the second quarter, so its sales was mostly not factored into Palm's recent financial report. The next quarter should be the first quarter in which Palm's high end smart phone, the Palm Pre, and their mass market phone, the Palm Pixi, gets fully included in their revenue report; a quarter in which, with the addition of Verizon, Palm's market exposure should triple. If most of Palm's sales are from the U.S., then tripling the number of cell phone customers who can buy their phones could materially expand their sales and revenue significantly.
True fans should be willing to read *all* news about the product, positive and negative. As long as the news is unbiased, it's fair game. Yes, fans can fairly put a positive spin on negative news. But choosing to ignore negative news entirely is putting one's head in the sand.
This is not good news to start a weekend.
Rofl @ requesting only positive stories...
No way is Palm going to be able to match the continued profit margins and marketshare of RIM and Apple... They are highly to blame for having their make-or-break phone be exclusive to Sprint in the first place. Even then, they aren't going to dent Apple or RIM's US marketshare (which RIM has a ton of) even with a Verizon release...
Think the investors didnt like the toned-down pace that was conveyed. Very hard to work up from the hype what was done in last CES. Its going to cost Palm ALOT to reinvent their name but more importantly to convince the carriers that their back in black. Confidence doesnt happen overnight but can be lost quicker than that.
They got the best, its just been an utter paint to convince the masses they got the best.
I honestly can't understand why the Blackberry is so successful. Well, I mean, I guess within a business the BB is pretty useful because of its own server and the services you can link to it but for customers not getting a business phone? I just don't find it appealing at all in any way, in any of its flavors. Small screens, horribly ugly UI with little intuitiveness, lack of a consistent user experience, etc.
Anyway, I will once again suggest to Palm: open up the App Catalog to all the territories where your phone is being sold at. That may not help them with Wall Street I guess, but it always helps to be able to receive money from all your customers on all fronts...
They don't just offer small screens anymore. The QWERTY phones are using 480x360 with a physical size comparable to other platforms with the same form factor and the Storm2 screen is plenty large for a touchscreen.
Some might not like it or consider it unintuitive but it's basically *the* goto for a reliable communications device, corporate or not. People often forget that the largest market is not smartphone tech-geeks. Huge sellers (and I mean #1 top seller overall) are stuff like the 8330, which is ancient by tech enthusiast standards.
Like I said earlier Palm needs to focus alot more into how to sell the product. RIM is the perfect example that you can have the biggest POS product but people will buy it if you convince them its gold.
It's not really POS though... RIM's marketing still sucks seriously compared to Apple. If you want a tale of marketing > all, look at Apple. RIM's marketing isn't anywhere near that level, yet they sell like mad anyways.
don't forget they are pretty cheap phones. Everyone where I work has one. Some were given to them by my work others bought their own. They seem to like them a lot. I haven't really used one but I don't find them appealing. Most of them got theirs for free which I think made a huge difference.
They feel cheap and are probably pretty cheap to make too. I can see why RIM sells so many.
RIM is successful because they kept refining what they did well. Customers could flow from one product to the next without missing a beat. Not the strategy over at Orange (err New Palm).
Lets get that stock price down to a $1.. Then I'll buy 1000 shares . Then release the super pre so i can make munnies . kthxbyebbq
As I mentioned before, the actual price of a company's stock is irrelevant to the company's day-to-day business unless:
1) The company wants to release new stock to raise money, or
2) The company wants to buy back shares of stock, or
3) In some other way, the company is taking actions that require paying for or selling stock shares, or
4) People change their behavior toward the company as a result of stock valuation changes.
Otherwise, when the value of a company's stock changes (up or down), there's no real way it can affect the company directly. The stock price falling will not cause Palm to fail. They already raised their extra $500 million.
The price of a company's stock is a reflection of what the market predicts will happen to that company. But the market is an imperfect predictor and includes as much human psychology as fact.
This isn't great news, but it also isn't horrible news. They have cash on hand at the moment. They are moving forward on their plan (even if it seems too slowly to us). If they are able to execute on their plan and if their carrier partners are able to perform their share of heavy lifting (aka, advertising and promotion and sales), then today's stock price is irrelevant. If Palm is NOT able to execute on its plan, then today's stock price is irrelevant.
IOW, the future of Palm and the future of WebOS are contingent NOT on the current value of Palm stock, but on the ability of Palm (and its partners) to execute on their plan and make WebOS sufficiently appealing to the mass market before it is too late.
Despite what so many people love to say, the window of opportunity for Palm has not closed. It is closing, but not yet closed. If today's news is still the kind of news we see in the middle of 2010, then it *may* be too late for Palm. But today, it is not too late.
I agree that Palm still has a chance, but time is ticking away. They need to add carriers asap, open app store, and continue to add features to webOS. I think the next 6 months will be very interesting.
Thank you for pointing that out. It's frustrating to read these things and see people react as if the stock market worked on any sort of evidence or logic. It's a popularity contest crossed with a dice game.
The article is a bit disappointing as it focuses on the GAAP figures. Like most things developed by accountants they're approximations to reality but not necessarily good ones.
For example Palm need to effectively hold back part of the revenue for the phones and amortize it over time under GAAP, anticipating that there are significant costs post-sale to provide updates etc. However the costs of keeping software updated is pretty much the same whether you sell 100 phones or 1000000 phones - so holding back a significant part of the 'profit' for each phone and only allowing it to be recognized in future years gives skewed picture of the real cash flow.
I'd guess this hurts apple and RIM a lot less because they have old product in the field - so sales made in past years are recognized in this year making it all sort of even out. Palm may not have enough earlier sales to offset them (yet).
Palm needs to release the new OS update for the PRE and get things rolling in the right direction before the holidays :) "Come on Palm your up to bat"
LOL, they released WebOS and the Pre handset before they were ready, earning a black eye, and now you want them to release updates to WebOS before they're ready too? Why do people continue to think that Palm is sitting on completed WebOS updates like eggs, waiting for a sunny day to release them? They don't have the resources to keep up with the market and now I'm fearing they don't have the momentum to even get acquired and levered to success. Too many misguided steps, they've sold a lot of units, but made few fans.
There are some very good comments posted here. We are going to be alright guys and gals. Have some faith, baby. Up and downs, peaks and valleys. Thats the game we play. Continue to support them. Don't waiver. Palm will be just fine.
Not one comment here refers to the reason why the public has not embraced the Palm Pre in the numbers expected.
Why oh why has the Palm Pre not been a runaway hit? Is it the software/user experience? The hardware? The marketing?
Those are the questions that should be explored.
The future plans of Palm mentioned by Jon Rubinstein are operational in nature. That will not solve any of the fundamental issues that Palm is experiencing.
Palm will have to re-think their hardware/software approach. They need to come up with a WoW product that a consumer can identify with as something extra ordinary.
There are very few Steve Jobs in this world. There are very few products that have a profound paradigm shifting effect in any market.
Palm needs Jon Rubinnstein to go to a retreat and come back with an Eureka idea because the Pre or Pixi have not lived up to the almighty consumers desire to embrace them.
Why? Proper advertising. Apple has mastered the marketing of their phones, and up until the Pixi ads Palm has completely bungled it. If I, knowing what the ads mean, can look at it and not think that it's going to convince anybody to buy the phone, then you can be sure that customers that don't know what the ads are about are just going to sit there and go "huh?"
The Pre and webOS were extraordinary. webOS still is. But Palm and Sprint haven't properly articulated that to the mass public.
And bad marketing reflects on management decision making. And as Warren Buffet say, when you buy a company you're buying the management and they are the most important people in whether the company is well run.
Ruby needs to do what Ruby does best and work on designing phones. I think he's in over his head actually trying to run a company. Palm really needs someone who understands this market and has been successful to be CEO.
don't know about that. he was at apple so he's been around it. but if they can't fix problems or do things because they don't have enough employees that's a money issue as they can't hire people so maybe they do need to be bought by someone big enough to do the job that needs to be done. like release globally not on one carrier in one country.
i think a lot of people here are like one of the early posters. They don't want to deal with bad news. They want someone to tell them everything is fine and so they don't have to do the hard work. It's like a golfer that starts to shank his driver so instead of addressing the problem he just practices his short irons.
I think that mentality keeps the standard low. And Palm releases a "good enough" product while "Apple" often releases something with a clear advantage.
Is pre better at music then iphone? I don't think so. I've gone back to my ipod even though i sometimes use music remix. But pre doeesn't compare to the slick integreated experience of itunes as a sync, music store, playlist manager, podcast manager, video manager, etc all a single slick gui. Better at Video? don't think so. Social networking like facebook and twitter? Not close on facebook cause it doesn't have a decent app? Email? don't know never had an iphone for email. But many say RIMM is better and they definitely have better physical keyboards from most peoples perspective cause you don't have to use your fingernails. So it's probably at best a better then ipod and a push with RIMM on email. Calender? Well it's got many issues with the calender? And this is from someone that pretty much likes his pre and it's interface. But what i think your left with where Pre is the clear winner, multitasking and notifications. Honestly, two things i think Apple will address with a new iphone in the middle of next year. And i don't think it's a big deal for most people. Doe palm suck at these? of course not. It's pretty good. I just not the best probably.
people get new phones every year. They aren't buying something to wait till palm can deliver they want something that works now or at worst tomorrow. But i think in general people that would be consider phanbois for palm don't consider their own bias.
my own opinion is palm has to stop being good enough for the people that already like palm and be the best out there at all the things the competitors do. Best at facebook, twitter, sync, email, best marketing, best image, best sex appeal. best price, best storage, best camera, best flash, best network. Don't whine about itunes make a better music manager or hell buy double twist or something. my dad always told me, you're not going to get the benefit of the doubt. You always have to be better then the other guy. Kinda like Maverick in Top Gun. Palm's "family name ain't the best in the Navy" and "they need to be doing it better and cleaner the the other guy."
the stock market does work on evidence but as ekuns correctly points out it's not a perfect predictor. Nor is it's role to predict. It's a market for stocks. And investors pay based on the going value they put on a stock. That value generally is a reflection of the general sentiment about a companies future. That sentiment however is based on human evaluation and is thus imperfect.
But in general bad companies can make good products and vice versa. And by "bad" i mean a company that is consistently profitable not something a fan group hates.
But investors value companies on their earnings, their debt, their dividends, and the consistency of all of that along with many other things. Consistency is predictable. That is why tobacco companies are often in favor. They have addicts as customers thus you can rely on them to consistently sell products at predictable rates. That is a safer investment then something that fluctuates with the economy, like luxury goods or luxury cars, which sometimes lose sales when money is tight.
They also look at growth rate of earnings. So a company whose earnings per share go from 7% to 8& to 11% to 13% year over year is showing consistent growth and that is a return investors like. The problem with Palm now is there is no consistent growth. Their earnings per share are going down which is rightfully going to cause concern to investors. They are making less money per share they've bought. And when that investor starts to gauge the future he's got to look at trends. Now if he's investing in a tobacco company he's going to say "well the consumers are addicted and they always buy cigarettes" But now they are looking at palm and saying, "You shipped phones last quarter but they didn't sell as well as before. Plus you've got some new products so that should have helped." (i don't know for a fact what quarter Pixi was released in so don't hold me to that). But i'll say again cause this is a fact and it's from Palm's own numbers. Palm shipped a whole bunch of smartphones to sprint and they are sitting on Sprint shelves. They just are not selling as fast for whatever reason. If you're best product isn't selling as good as you said it would that is a fundamental business problem. Bottom line consumers are picking another product over Palm's. It's not caused buy blog posts or whatever. But they are looking for something that will turn that trend around. They are wondering why it wouldn't happen on Verizon. And so far Palm doesn't really have an answer to prove that over multiple quarters "sell from Verizon stores will increase not decrease." And then there is the basic fact that Palm is only in the financial situation it's in because it has a history of being run poorly. And investors take into account that history as well. I don't think anyone can claim the stock market works on no evidence. it's just not a predictor of the future, its not infallible, it's not always right, but there is a lot of thought put into it.
Well, lets factor in the fact that Sprint is being extremely hardcore about not allowing anyone to buy a Pre before their two year contract date is up. That means your just not going to ever see a spike or increase in sales of the Pre. They will remain the same until they jump onto another carrier. (Only so many people's contract open up per quarter, and a fraction of those can afford a Pre)
So, I'm not sure what anyone was expecting. The number is going to dip, or increase 5% a quarter. You'll see an increase because of Christmas, then a dip next year.
For me, it's the best electronic device I've ever purchased. By far. And I tell everyone I talk to about phones. If they are on another carrier, their eyes glaze over. If they are Sprint, they are interested but say they will have to wait until their contract is up.
iPhones are the thing to have here in Hollywood. At my nieces college, it's Blackberry's. Business people use Blackberry's. It's a tough market to crack. This is a hell of a phone, though.
And I think the worst that could happen to Palm is they will be bought out by Nokia. Not that big of a deal.
thats not entirely true i bought a pre half way through a 1 yr contract and didn't even extend to a 2 yr.i paid full price for it but i still got one and now in 6 months i can use my credit to get something else if the pre doesn't step it up and the stock thing has been happening for months now some days it up and others its down hasn't been at 10 since i bought in but really hasn't been that great of a stock either sprnt stock isnt that great either about 3 bucks a share does that mean there on the way out too?
Why 2010 will be a great year for Palm!
Nearly all of Palm's revenue was from one product only - the Palm Pre, and from one major carrier in the U.S., Sprint.
The Palm Pre has sold over 1 million phones (estimate).
(1) Palm actually exceeded the revenue estimate. Analysts expected revenue of $266 million for the 2nd quarter. Palm's revenue was $302 million for the quarter. They lost only 5 cents per share more than the analysts estimated (which if calculated is $7 million dollars).
(2) Palm has $590 million cash (and investments) to support their future growth.
(3) Palm had only one product on the market - the Palm Pre, for most of the quarter. The Pixi was introduced only two weeks before the quarter closed - so it had very little impact on the 2nd quarter revenue.
(4) The year 2010 will be a different story for Palm starting in January, with the inclusion of Verizon and more worldwide distribution.
(5) Sprint is selling the Pre at the approximate rate of 500,000 phones per quarter. This comes to 2 million phones per year. And this number does not include the Pixi.
(6) Verizon should be able to do at least 50% better than Sprint in marketing and selling the Palm Pre phone. That should result in sales of 3 million phones or more per year.
(7) So between Verizon and Sprint, Palm could potentially sell 5 million phones a year. And this number does not even include the Palm Pixi phone, distribution of Palm phones globally (including China), or AT&T - which has shown great interest in Palm phones.
(8) The question is would the Palm Pixi enable Palm to sell another 5 million phones per year through Verizon, Sprint, and Palm's global partners for a total of 10 million phones in 2010?
Conclusion: A lot of investors are not looking at the big picture. They make their investment decisions based upon news bits. In fact, they also don't look at the details. Oh well, it's their money!
Just because Verizon has nearly double the customers doesn't equate into more sales.
Sprint isn't exactly small potatoes either and even declaring the Pre its flagship and giving it flagship treatment, sales were flat out disappointing. Why would you expect sales to be any better on Verizon with hardly any flagship type backing? If anything, V has more competition with the Droid, Eris, and upcoming smartphones.
The Pre and Pixi may be viable phones. But neither compete with the high end slab/landscape slider devices that every platform has. One only has to look at the Round Robin and see the phones they chose. Palm offers the smallest screen, a troublesome vertical slider, and build problems. Palm basically said they're not looking to release a quality high end competitor and will try in vain to sell their cheap plastic toys on more carriers.
Combined with Palm saying their sdk will stay unchanged, no GUI access, and basically worthless apps and its not good.
Mix all THAT up with horribly bad marketing and the future looks bleak.
Verizon has shown strong interest in the Palm Pre and Pixi phones.
You are obviously ignoring my arguments. The Palm Pre phone is a flagship phone with worldclass operating system in webOS. Sprint has reported that the Palm Pre is just as reliable as any new device that has been released from the other phone manufacturers. It appears that the people who do not own the phone and are likely Palm competitors have been taking about problems that do not exist. The original manufacturing problems with the Palm Pre, which is typical of a lot of new devices, were addressed and solved in August of 2009. Both my Palm Pre phones have been perfect since I bought them in June 2009. Oh, and for your information, Verizon is currently training their employees on the Palm Pixi phones.
How well is the Palm Pre doing against Android, HTC, and Motorola?
A December 15, 2009 report on Palm by MKM Partners analyst Tero Kuittinen says
I still think Sprint shot Palm in the back by forcing users to get on an everything plan for the Pre. I can't afford to upgrade from my legacy plan so I don't have one, and I know there's plenty more people besides me in the same boat.
How Sprint can increase their market share!
CountBuggula, good point!
I have to agree that this is one area where Sprint could have done much better - and still can do better! They really should rethink their strategy with regards to the Palm Pixi. I think that Sprint fundamentally does not understand the stragetic importance of the Palm Pre and Pixi products. If they do not market the Palm Pixi phone to their current "feature phone" customers at an aggressive price (something like $25 or Free - without those funny rebates!), and without increasing the monthly cost of those customers plan, then they stand to lose a few hundred thousand more customers every quarter.
A lot of people are hurting in this economy and Sprint can take a leadership role in giving them access to the new generation of smartphones like the Pixi (even if they are not willing to do the same with the Palm Pre).
CountBuggla, I hope Sprint hears you. You are a perfect example of the untapped customer base that Sprint is ignoring.
it's not profitable to have people use that much data on a plan unless they charge rate per amount of date downloaded which would be higher per megabyte then the bundled everythign plan. sprint's concern it's it's profitability not the Pre.
Thinker, selling lots of phones is nice, but you you are not sustaining or growing your market share, your days are numbered. Also, the repeat buyers of Palm products are not impressed by the downgrade from the Treo, so the easy sales may be a thing of the past.
PreDogs, thanks for the question. I for one am not a repeat customer of Palm. I owned a SANYO feature phone before buying the Palm Pre. The Palm Pre interface, built on webOS, makes me think of a desktop operating system - it's simply incredible and fun to use.
I do not know much about the Treo, but I think the point here is that even if there are features that can be considered a downgrade, there are a whole lot of more features that make the experience of using the Palm Pre smart phone fun. Successful companies do not always have to compete on features, especially if you look at the mass market. People want a simple, elegant, and intuitive user interface; and that is what the Palm Pre and Pixi are about.
But the key point for me is that Palm is constantly enhancing the user experience and feature set of the phone. I feel as if every other month, I am getting a new gift from Palm, given their frequent updates. I am sure that Palm has done their best to address their legacy users (such as their Treo user base) while doing as much as they can to appeal to the broader market. It is not easy to rebuild a system from the ground up as Palm has done with webOS and maintain full feature-by-feature backward compatibility. But also, previous users of Palm devices must understand that there are new and better ways to do things and in this modern world, people should be willing to change and adapt.
When you think about market share, you have to think about the main demographics. The Pixi was designed for those wanting a smart phone but for whom price is definately a consideration. Sprint has not pushed the Palm Pre as much as you might imagine. The Palm Pre still cost $250 at Sprint. The price comes down by $100 if you are willing to mail in a $100 mail-in-rebate. I know people who do not like dealing with mail in rebates. And most cell phone customers do not like renewing their contract through a third party like BestBuy or Walmart, even if they can purchase the Palm Pre phone for as little as $100 from those retailers. If you are a Sprint customer that might be considering leaving your carrier and are someone who does not like dealing with mail-in rebates, and you are price sensitive, then Sprint's price of $250 for the Palm Pre will turn you off.
One final consideration. It is likely that a lot of Sprint customers who bought the Palm Pre phone did so because their contracts had expired during the past six months. In fact, it is also possible that every month, over 1 million Sprint customers contract will expire. If that is the case, then this is a large pool of potential customers for Palm. Of course, some customers may decide to keep thier service but not buy a new phone; so these customers are not required to sign a new contract. A lot of these customers could be tapped by Sprint if they offer for example Pixi for free with a new 2-year service agreement. Now I think that Palm should sit at the table and have a long talk with Sprint about marketing the Pixi to this customer base. But so long as Sprint wants these customers to pay $200 for the Pixi and then send in a mail-in-rebate, it will create some challenges. The sad thing is that it is likely that Sprint is losing a lot of these customers to AT&T, and do not even know it! Having said that, we should all acknowledge that Sprint has done a lot of positive things for Palm. And as a Sprint customer, I am very happy!
Guys, this means nothing. Stocks typically go up on rumor and down on news. Evaluate the news and ignore the stock price.
Sprint amde the pre their flagship device? Not Hardly rarly ever mentioned in their ads and the goofy eerie ad campaign by Palm did not help either. Sprints not been a help much at all IMHO.
Apple has not spent a dime or a half a second promoting the iPhone, its not even in their catalog. Palm has given many references to Pre and shown it in a good light. However, the Borg queen has probably chased of three or four customers for every one that she has managed to intrique.
Apple has spent A LOT promoting the iPhone. Most of the iPhone ads you see are from Apple, not AT&T. That was part of Apple's deal with AT&T.
that's TOTALLY wrong. Apple spends a ton of money on commercials. most ipod commericals are apple commercials. Now people are just making up facts. and it shoudl be said the amount of advertising by a carrier is often negotiated and contractual.
Palm need to start making phone with large multitouch screen and built in keyboard. I strongly beleive if the Pre had a build it keyboard it would have sold millions, WebOS is great but you need hardware to match it example HTC.
It's not likely that Verizon will support the Pre or Pixi anywhere near the way they did with the Droid. They spent $100M to launch the Droid which is about $100 per device. They have an exclusive on the Droid and license the rights to the name. Droid is their flagship smartphone brand. The webOS smartphones will be shared among three different carriers. There's no point in advertising the Pre when two other carriers will have it.
Will the webOS devices do well on Verizon when people have a choice of all sorts of newer smartphones? How about AT&T customers? A lot of people bought the Pre because they were loyal Sprint customers and Sprint didn't really have a hero phone. Can you say the same for Verizon or AT&T customers? What about all the discounting that had to happen to get the Pre and Pixi sales going.
Verizon will be good for Palm!
The Droid is an Android phone and not a Verizon phone. The only exclusive Verizon has is on the name "Droid" not the device or operating system. The point is that any company that sells an Android phone to Verizon will have to call it "Droid". So what Verizon spent $100 million on is the "Droid" brand. Clever!
Verizon is a business like any other business. They are interested to giving their users exciting products with a nice user experience. It appears that Verizon's new approach is to partner with the phone manufacturers by working closely with them. This approach can be seen with the Palm Pixi. Verizon has started training their staff on the Pixi but beyond that, the Pixi on Verizon's network will come with WiFi; this will make the Pixi very attractive. This is an indication that Verizon will work closely with Palm to present unique experiences for their customer base.
Verizon has a very deep pocket, the same pocket they have used to aggressively market the BlackBerry phones. I think Verizon is interested in seeing a number of strong players in the phone market and as such, I am sure that they will be a good partner for Palm. Verizon is a very sophisticated company in all areas, including marketing, and I am sure they will highlight the uniqueness of webOS and it's fun, simple, innovative, and sophisticated user interface in their marketing.
Why Palm will do well at Verizon!
Guy,
What discounting? Sprint is selling the Palm Pre phone for $150 (after $100 mail-in rebate) and the Palm Pixi phone for $100 (after $100 mail-in rebate). Have you seen the buy-one-get-one-free ads Verizon has been running to sell phones from various manufacturers? Based upon your argument, those manufacturers will do poorly if their phones are not heavily discounted. Please "tidy up your facts".
If anything, the fact that Sprint has sold approximately 1 million Palm Pre phones at such high prices is an indication that there is a lot of room for a price drop. Oh, and did you know that we still do not have any information on Pixi sales?
And finally, the Android market is divided. When a customer wants an Android phone, they have many manufacturers to choose from. But when a customer wants a Palm Pre or Palm Pixi, they all have to go to one manufacturer.
Ok people, breath into a paper bag 5 times, it's just a phone.
It is just a phone, with all this data on Google now, going to a non-palm phone will be easier than ever. No Palm PIM to keep our interests vested in Palm. This will only get worse with time. Giving up synch was as misguided as BB giving up its focus on email.
Like I said, it's a phone. not a forty thousand dollar car. I am really happy with my pre, and if 6 months pass by and if the doom and gloom folks are right, given how dynamic the smartphone industry is, there will be an even better phone to upgrade to. Note to everyone, the sky is not falling. So drink some warm milk and go to bed, everything will be much better tomorrow.
Palm, more than likely, is headed toward a slow and painful demise.
First stock does count for a part of our topic. It looks at palm sales then compares it to other phone sales in our category BB, Iphone, & droid. If they are selling more phones and palm is not selling nearly as many then something is terribly wrong. This is not unifocal assessment palm against itself. There is multifocal assessment. If there was marginal sales from other smartphone makers then the news would not have been so bad. Think of it like a pie. If apple and BB are eating more and more of the pie, then we are left with less and less until we are left with crumbs. If everybody stays the same then no harm/no foul. Well you can obviously see what is happening the the smartphone pie.
Now for the verizon subject. If the stories are correct that verizon has setup their system to accommodate a Iphone (gsm) addition, then palm is 100% dead. Could this be just a rumor. Maybe but if it is true, it makes great business sense. Palm has market share. If palm dissolves its ability to make something of the pre/pixi, then there is 2 choices if you are with verizon -> android or bb. Android will probably get more of the palm pre customers. Probably would not go well with apple since they are in a competition and apple sees google as more of a challenge then BB. If iphone goes to verizon, they will kill two birds with one stone. The move will kill palm and it will also provide an avenue to lock in more customers thus widening its margin against google.
The palm phone that comes to verizon will not be a major difference from the sprint palm phone. More than likely a spec difference (more memory or something superficial). Nothing functionally different. It has become apparent to me that palm intended to put a web phone that lacked functionality. It intent was not to provide much more than that. They decided to put the functionality component onto the outside developer sector. In my opinion that was not a good idea. The phone should have been developed with the intention that the internal developers would be making a fully functional smart net phone. Instead we get a net phone and we have to wait for other outside developers to add the smart component to the device. People do not like that idea. They want a phone to have basic functionality out of the box.
Conclusion, very very risky times. High probability that there will no longer be palm after 2010. Just stick in there, the worse case scenario for those that bought a pre/palm like myself, is that we can purchase a new phone every year. Which basically means I have to learn a new phone os. I personally have to say webos is the best os but it is not managed appropriately. Should have, Should have, should have leads to could have when you had the chance. Maybe there will be a reincarnation of the webos, with a company that has the potential to unleash the power of webos with a great phone design.
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RIP Palm 2010
I have to admit, this type of story really brings out the trolls in force.
IMO, Palm isn't going anywhere, the stock price has always been goofy because its based on heaven knows what (I've actually seen really good news for the company result in drops in stock price.... huh?)
I think six months from now, when we're looking at one year post Pre/webOS launch, when devices are on not only world wide carriers, but the big three here in the US...and who knows, os upgrades? Hardware upgrades? Oh my!... Palm will be doing just fine. And the stock price may or may not reflect that. Like it has/hasn't since the company went public. /sigh
Oh, and remember: Don't Feed The Trolls.
You have no idea. No facts. Just hope. But I guess that is all we will have for now. Troll? I do not like the iphone, gphone, BB phone. I think they are crap. But I do know that if Iphone and pre went face to face on verizon. I can assure you that Iphone would when the sales. If you can deny that then you very bias and do not want to face the facts.
If they can not seal the deal on verizon, it is over. It is just a phone/os. You can find another. Nothing major.
Also, if the iphone goes to verizon, verizon would win customers from sprint and at&t and probably other cell phone networks. Verizon has a lot to win from a iphone on there network. Verizon has been going after the iphone ever since 2007. 2010 might be the year.
I am a regular precentral reader-and not a palm pre owner(I had @ one time hoped to be ,but considering i am a t-mobile user i didnt want the termination fee). But the reason i am commenting now for the first time,is that i see a lot of these posters are up in arms about the true hard facts of the palm situation.Understand the pre is a wonderful innovative device,but the reality is ,it is up against an phone that has the backing of a mega company(crAPPLE-i have an unlocked iphone by the way) and against a phone (the droid) backed by google and the largest wireless provider ver-whyzon. But make no mistakes as soon as this great device lands on the other carriers ,its guaranteed to blow-up!(in a good way).I for one am happy to be on t-mobile because of the upcoming devices.I.E,the nexus one, htc hd2 and the sony x10.But i will tell you the pre deserves respect of its own! It lit a fire under apples' and motorolas' and googles' ass like no -other device before it.So in short people,be happy you have had and enjoyed this device for as long as you have.Keep in mind-verizon may finally get it, but sprint had it first and will always get first dibs on palm products.You had the pre for a while so share the pre love-i hope t-mobile one day gives me some pre love. After the nexus one is passed on to other carriers i hope i will finally have MY PRE.Stay chill,and wait for your first dibs on palm pre 2! keep up the good work pre central!
Back when it launched, sales volumes for the Centro far surpassed general expectations, so don't underestimate the power of low price and good social networking/texting features to young consumers. Unlike most of these readers, the mass market waits until products come down in price before they move en masse. It's too bad the Pre launched when Sprint wasn't in much of a position to discount it heavily, or it might have taken a little more share these past few months, a time of strong smartphone sales.
And as for marketing, it always gets too much of the blame and too much of the credit for how a product does, don't you think?