In wake of loss, Palm looks to Pre as savior
Palm announced big losses for its fiscal fourth quarter, the last quarter before its hot new smartphone hit the market, but executives see the Pre as the key to its turnaround.
Palm Pre
(Credit: Sprint Nextel)CEO Jon Rubinstein said Thursday during the company's earnings conference call that sales of the Palm Pre, which hit the market on June 6, have been "strong and growing."
He didn't give exact sales figures for the device, which has a touch screen and uses a new operating system call WebOS, but he added that he "couldn't be happier with our launch." Analysts estimated that between 50,000 and 100,000 Pres were sold in the first few days that the device was available. The phone is exclusively available on Sprint Nextel's network.
That's the good news for Palm, which on Thursday reported a dismal fiscal fourth quarter, which ended May 30. For the quarter, Palm reported a loss of $91.5 million, or 78 cents a share, compared with a year-earlier loss of $41.1 million, or 40 cents a share. Revenue fell 71 percent to $86.8 million.
But Palm's new CEO, a former executive at Apple's iPhone music player division who replaced former CEO Ed Colligan earlier this month, thinks the company is on the right track with the Pre.
"The launch of Palm WebOS and Palm Pre was a major milestone in Palm's transformation; we have now officially reentered the race," Rubinstein said in a statement. "We have more to accomplish, but the groundwork is laid for a very promising future here at Palm."
While it's unlikely the Pre will catch up to Apple's iPhone anytime soon, analysts are predicting a heavy volume of sales. Some say that the company could sell about 100,000 handsets in July and 200,000 in August.
Rubinstein said he was confident that the company would meet demand for the new device.
Palm has been banking on the Pre to help it revive its ailing smartphone business. But the company faces stiff competition from others, such as iPhone maker Apple and BlackBerry maker Research In Motion.
One thing that might hold back adoption of the Palm Pre is the fact that only a handful of applications are yet available for the phone. But Palm executives said on the call that they are working to get more apps out to users. That said, the market research firm Medialets reports that Pre users have already downloaded over a million applications so far.
Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie. 
Just like the Mac, which cannot even manage 1/30th of Windows sales worldwide, right?
It's a big gamble for Palm to let the future of the company be dependent on a limited footprint. If the phone would have been available with more carriers, and other technologies than CDMA alone, the adoption would be higher, and the applications would come at a faster pace as well.
We are at the end of our contract with our current provider, but the fact we can't use it on our occasional trips abroad (GSM), and Sprint's refusal to allow tethering make it impossible for us to replace our current phones with the Pre, even while the specs look great.
Don't get me wrong, this is not a statement against Sprint, but much more against the trend of exclusive phone/carrier relations, just like iPhone/AT&T and Google G1/T-Mobile. It's an example of short term thinking that could be fatal for Palm and other innovators. And because of the monopoly it limits the customer options in an unacceptable manner.
Sprint is the "launch partner" for Pre, and Pre isn't the only WebOS phone in the pipleline. Sprint and AT&T are going to have the Eos later this year, and Sprint's exclusivity period doesn't last forever.
Palm is negative in almost all key financial statistics (EPS, book value, debt, assets, short % of float, cash flow, 1 yr. target price, et cetera ad nauseam).
Engineering isn't even staffed well enough to cough up an SDK before the phone launch, despite the fact that they know that a healthy app store is vital to the long-term success of this platform. Sure, Apple didn't have many apps when the original iPhone debuted, but there was no App Store. The game is different for Palm, the economic environment is different too.
The biggest question for Palm is whether or not they can retain prime engineering talent for the next couple of product cycles. How many more great people can Palm afford to lose before they are incapable of competing in this cut-throat environment?
They haven't had any trouble attracting talent whatsoever to date, and only a complete fanboy would claim that things aren't going to get much better -- and much more interesting -- from here on out.
the pre is doing fine , it doesnt need iPhone like sales to survive !
the smartphone market is only 9% of the entire market !
Palm might sell something like 500,00 units this quarter
which is considerabily less than the iPhone
but it'll get the company back on track and thats enough for now
yes the bloggers and analysts were stupid as usual to call it a iPhone killer
but part of that was because of Ed Colligan who made snide comments about Apple and the iPhone when it lauched
but now he's been removed and serves him right !
But they're "special" aren't they?!?
1. Mutlitasking - all smart phones from now on must be able to multitask or look pre-historic.
2. A replaceable battery - Just carry an extra battery with you in your pocket and you have as much juice as you want. The ridiculous iPhone battery scheme - where you must replace it by sending to the manufacturer now looks as absurd as it actually is.
3. Flash - By the end of this year the Pre (and most other smart phones) will have Flash 10 (the one on your desk top computer). You want to talk about apps? As soon as smart phones get Flash, they all have 100s of thousands of apps - including almost every video and game site on the web. And once the Flash community has the Flash Player on virtually all smart phones and starts getting serious about developing smart phone apps - the Apple App store is going to seem silly.
The iPhone won't die - it will adapt - it has no choice.
Nope, its a failure because of this:
"We've learned and struggled for a few years here figuring out how to make a decent phone," Ed Colligan apparently laughed about with John Markoff last Thursday morning. "PC guys are not going to just figure this out. They're not going to just walk in."
?We think that will be a greater driver of purchases in the future. We don?t want to follow design fads.? (about iPhone vs. Centro)
?We?ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They?re not going to just walk in.?
"I think people are buying Centros for different reasons [than the iPhone]. They?re [Centros] easier to use, they?re a little less pretentious, they are smaller form factor. They?ve got a full keyboard for doing data entry."
Roger McNamee (of "Elevation Partners", major stakeholder of Palm):
?You know the beautiful thing: June 29, 2009, is the two-year anniversary of the first shipment of the iPhone,? McNamee said today in an interview in San Francisco. ?Not one of those people will still be using an iPhone a month later.?
"The Pre going to be a million times -- well, not a million times -- several times faster than the iPhone."
"The Pre is going to run rings around [Apple] on the Web."
Yeah, its a failure.
These apple fanboys are funny, thinking that mass sales equals a better phone, but when these same fanboys see that Microsoft machines sell more than Apple machines, suddenly the windows users are stupid. Get a gotdamn clue man, and please post something credible
I did.
The Pre is on Sprint only. But there is more... We all know the iphone is AT&T only, **BUT** people are SWITCHING to AT&T to get the iphone. People are NOT (in large numbers) switching to Sprint to get the Pre.
If the iphone were to go to Verizon and/or tmobile it would be 100% *OVER* for the Pre (and the G1 pile)
Cody
I have a question: why did both AT&T and Verizon both announce that the Pre would be coming to their networks in 6 months? I think we all know the reason...
[CNET editors' note: Personal attacks deleted.]
So the one doesn't have to do with the other.
I'm also a phone geek as my one geeky thing I have to have the lastest/greatest on. The iphone just happens to be the best phone on the market -- sorry. I wish it was made by MS to be honest with you but I'm happy it's at least made by an American company (even if they have it slave assembled overseas in China)
[CNET editors' note: Personal attack deleted.]
If the Palm Pre is a "failure" because it "only sold 1/5 as many as the iPhone," then what does that make the Macintosh -- which is under 3% of the global PC business versus 95% for Windows?
If "it's all about the number of applications," then isn't the Macintosh vastly inferior to Windows, which has 40x as many applications as the Macintosh?
If the Pre is "doomed" because Palm has launched only on CDMA networks that represent 50% of the US marketplace, then isn't Apple doomed for producing computers dependent on an OS that powers under 3% of the global marketplace?
Seriously guys, get a grip. The fanboyism is getting ridiculous, and your own arguments undermine a large portion of Apple's own legitimacy.
So if the Pre would have done better if they launched in more markets, why didn't they? Do you think that prudent people want to take a chance on buying a product from a clear under-performer like Palm, trying to take its last gasp, on a network that has been bleeding users for years?
Over 80 percent of pre buyers are already Sprint customers. It is clear that there are not many willing to take that chance of jumping ship on their current provider to head to Sprint. The horse has a pretty mane but it will be hard to mend that broken leg even with the best vet out there!
Pre sales are barely enough to keep the dogs slightly away from the door for now, but the smell of fresh blood will keep the dogs ready to pounce when the next quarters red continues. Apple's war chest of 50 billion in cash will be hard for anyone to compete against, while Pre exists on mere fumes of new investors banking on the talent of Apple has beens.
Because they're a much smaller company than Apple and don't yet have the resources.
Also you say that Apple has more cash that MS but looking at MS's most recent financial statements shows that they have more cash and cash equivalents (just over $7.25 billion), more current assets (just under $40.75 billion), and more total assets (just under $68.9 billion).
I don't discount that the Pre may struggle and it will be a long time, if ever, before it can truly be compared to the iPhone in regards to units sold, apps, etc. but your argument loses credibility if you don't actually look things up and just spout random number, I mean anybody can do it but it doesn't make it true.
The Dow was dragged lower by sliding energy shares as oil settled below $70 per barrel. But strength in some financial stocks helped cushion the S&P 500's decline.
The technology-heavy Nasdaq outperformed, helped partly by gains in Palm Inc, after it posted a narrower-than-expected loss late on Thursday and said demand was strong for its new Pre smartphone. Palm shares jumped nearly 16 percent to $16.22.
http://www.fiercewireless.com/story/sprint-palm-drop-after-analyst-report-pre-sales/2009-06-18
http://sprintconnection.kansascity.com/?q=node/1064
The Pre is a simple attempt to copy the iPhone like it or not. Why do you think Palm has gambled their entire company on a copy-cat product that was developed by Apple has been employees? Both Palm and Sprint are on their last gasp. Sprint has lost 4 million post-paid customers in just the last year. A couple of hundred thousand Pre sales even at your suggested 40 percent won't even make a dent in Sprint's failure in the marketplace.
When you discover you are riding a dead horse, the best strategy is to dismount. However, in business we often try other strategies with dead horses, including the following:
Buying a stronger whip.
Changing riders.
Say things like, "This is the way we have always ridden this horse."
Appointing a committee to study the horse.
Arranging to visit other sites to see how they ride dead horses.
Increasing the standards to ride dead horses.
Appointing a tiger team to revive the dead horse.
Creating a training session to increase our riding ability.
Comparing the state of dead horses in today's environment.
Change the requirements declaring that "This horse is not dead."
Hire contractors to ride the dead horse.
Harnessing several dead horses together for increased speed.
Declaring that "No horse is too dead to beat."
Providing additional funding to increase the horse's performance.
Do a Cost Analysis study to see if contractors can ride it cheaper.
Purchase a product to make dead horses run faster.
Form a quality circle to find uses for dead horses.
Say this horse was procured with cost as an independent variable.
Promote the dead horse to a supervisory position.
Sometimes you just have to face the reality and quit beating the poor dead horse!
Actually, Palm was way ahead of the iPhone. The original iPhone had a new type of interface and a better web browser, but in functionality they still were way behind the Palm Treos.
The new webOS interface is much better than the iPhone. It is very well thought out, and very functional--not just flashy. It is a new paradigm in how to do things, and about the only thing that makes it similar to the iPhone is multitouch display (which by the way Apple did not invent or have patents on.)
The problem with all of these phones (Pre, Iphone etc...) is the expensive monthly fees that come with them... until the monthly prices drop to affordable rates, I'm not interested
Palm needs very much for Pre to sell well enough to generate a revenue stream that will allow them to rebuild the company. Within a couple of years, if they continue making great products, they should be big enough to handle an iPhone-sized launch.
We get it man, the iPhone is your religion...It is your symbol of elitism (for whatever that's worth), so you continue to praise it and prance around it like a little schoolgirl; which only proves 2 things...that you are not very smart, and that you would take steve jobs' member in the rear if he offered it to you.
The thing you have to understand about the typical Apple Jihadist is that they're insecure and know almost nothing about technology.
They view technology as an expensive fashion statement to be worn like an accessory to showcase their "coolness." Thus, any new technology that threatens their smug sense of superiority generates massive cognitive dissonance and endless attacks.
They revel in their ignorance. They don't care that Apple didn't invent "smartphone apps" or "app stores" or touchscreen phones or portable email or portable web browsing or on-screen keyboards -- they just repeat the old tired cliche that everyone who ever offered those "copied Apple's innovation."
But when a new product comes along that outpoints an Apple product in every way, they go ballistic.
They did it when Atari and Commodore outdid the Macintosh with the ST and Amiga at a lower price.
They did it when the "classic" Mac OS was hopelessly obsolete and outclassed by Windows 9X and NT.
They did it when Intel chips blew the doors off the failed PowerPC project... and then, without skipping a beat, went from insisting PowerPC was "better than Intel" to declaring Intel the "superior technology."
And they're doing it now that Palm has moved the smartphone bar way above Apple's head.
- by randygrenier June 27, 2009 9:36 AM PDT
- Obviously the reporter isn't a financial reporter. Palm's losses were below analysts' expectations. This was actually good news, and as a consequence Palms stocks went up.
- Like this Reply to this comment
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Showing 1 of 2 pages (58 Comments)I've been using Palm OS phones for years. They were way, way ahead of Apple with smartphones. Again with the Pre, they've come up with a great product, and with webOS, they will come up with more great products. I wish them well.