Palm waiting for Pre to end revenue slump

Palm can't wait for the Pre to hopefully end a streak of rough financial quarters.

(Credit: CNET)

Palm may have wowed the public with the demonstration of the Pre, but unfortunately for the company, no one can buy it yet.

The company announced Tuesday that its third fiscal quarter will be dismal, as had been expected. But it will be even worse than Wall Street had thought: Palm expects to record between $85 million and $90 million in revenue for the quarter that ended last week. Analysts had been expecting Palm would take in $157 million during the quarter.

It's a simple story for Palm: although it debuted to rave reviews, the Pre isn't ready, and sales of its older products have fallen off a cliff. While the company tried to cover the gap with the Treo Pro, sales haven't been brisk given the economic climate and tepid carrier support.

The Pre is expected to arrive on Sprint's network in the second calendar quarter, but probably won't arrive early enough in that quarter to make a difference. As part of Tuesday's announcement, Palm said it plans to account for sales of the Pre using the same method Apple is using for the iPhone, that is, recording the revenue associated with each sale over a 24-month period, rather than all up front. This allows the companies to deliver software updates for free while satisfying an obscure accounting rule.

Before then, however, Palm also has to account for the $100 million cash injection that it received from Elevation Partners in December. The company burned pretty much all that money--between $95 million and $100 million--during the quarter, according to its press release, prompting it to consider tapping other sources of capital.

[pepestudio_dotmac]

I think it's a little too late, really.

[Norseman]

"The Pre isn't ready."

That's the problem! Palm made the same mistake that Microsoft has made over and over. They announce stuff way before it's available and then people, because of a short attention span, forget all about the hype before the actual product becomes available.

Apple, ALMOST always, doesn't announce a product until it's available the same day. That way, they get maximum mileage from the new-product hoopla. Say what you want about Steve Jobs and the "reality distortion field." Apple, without a doubt, knows how to market a product. Palm and Microsoft do not!

[oneAwake]

Huh?? The iphone was announced 6 months before it released in the summer. What are you talking about? Next time, try to do a better job of hiding your bias! ;)

[Markus2008]

Your missing it. The real issue is that the Pre has competitors that consumers can purchase right now, when Apple unveiled the iPhone, it's competitors were years from having a similar product, so it was safe to show it early. Palm made the mistake of getting a bunch of consumers hungry, then leaving their competitors with all the food.

[1812dave]

I have to agree with you, Norseman. The announcement of the Pre was WAY, WAY too early. By the time the Pre comes out, it's going to seem "old".

[bonesbautista]

And drop the exclusive carrier thing, sheesh. I know 8 guys and gals at work that would drop coin on the Pre if it were up and running on Verizon, +1 for me. Palm needs to sell product yesterday - the iPhone's an ATT exclusive, but last I checked Apple's selling a few computers and iPods, too. Palm? Well, there's 3 or 5 Treo Pros for sale that nobody wants (heck, I'd get one of those on the VZW network, but noooooo.). Palm had better not drag out delivery of this gem.

[pretenderkc]

you can always UNLOCKED the device. :-)
both VZW and Sprint used CDMA network.
of course, you can't cross over to GSM network like AT&T or T-mobile.

[elllroy]

announcing the pre 6 months before it is avalable was a horrible move by palm. that way people interested in palm's products stop buying palm's old phones and wait for the pre to come out. announcing a new, better version of a product you are selling right now long before it will be vailable is a very bad business move. it is called the osborne effect and NOT DOING IT belongs to the 101 of business. you gain nothing, you lose a lot of current sales and the hype around your new product washes off before it comes to market.

apple would never do that. (all the new desctop computers announced yesterday are instantly available). the iphone was announced 6 months before it was available because apple had no phone they were selling at that time thus they could not canibalize their own sales. what they did on the hand was was freezing purchases of the competitions' smart phones, taking sales from other companies by building a large pent-up demand.

palm: idoits running a company, apple: geniuses running a company

[regulator1956]

Remember Osborne? Yeah, well no one else does either.

Live and don't learn. That's the rule of most businesses.

I agree with you elllroy, idiots.

[sprintguy]

Apple did indeed launch as Palm has; very early. They both need to capture the exposure and hype that can be best attained around CES and Mac World shows. The difference is, Apple didn't have a product already out there to be hurt by those in wait. It's a calculated risk to balance the hype of that CES launch against the lost sales until release. The bummer is that they couldn't exceed expectations and get it to market successfully sooner than planed.