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  1. Xyg
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       #1  

    via Reuters

    PALM Earnings Preview

    Palm Inc. (PALM) is set to announce its first-quarter of fiscal 2010 results on
    September 17, 2009.

    Palm had not provided any specific guidance for the first quarter, but expected
    gross margin on an adjusted basis to be above 30% for the long term. The company
    also expects operating expense to increase from the fourth quarter level as it
    starts aggressive marketing of Palm Pre and expansion of product development and
    sales & marketing capabilities. The company expects to generate positive cash
    flow in the second half of fiscal 2010.

    Although, the fourth quarter was good, with the company beating the Zacks
    Consensus expectations, revenue declined by 70.7% from last year and the loss
    increased year over in the quarter. We do not expect PALM to become profitable
    in the next three to four years. It is also likely that the company will have a
    tough time delivering strong top-line growth. Additionally, price cuts from
    competitors will put pricing pressure on PALM.

    To fight against competition and gain market share, Palm recently announced a
    price cut of its flagship smart phone and introduced a new cheaper version of
    the Pre called Palm Pixi with advanced features. Pixi is expected to be
    available during the holiday season in the U.S through Sprint Nextel Corp (S).
    Just after Palm`s announcement, Apple (AAPL) cut the price of its iPod Touch and
    provides tough competition through its refreshed iPod line.

    Moreover, as Palm Pre was launched in June, we expect that its impact will be
    better reflected in the current quarter. Although Palm has had some initial
    success due to the media hype, we remain unsure regarding its subscriber base in
    the coming six-month time frame.

    We believe Palm will continue to struggle as it competes against much larger
    competitors such as Apple, Research in Motion (RIMM) and Nokia Corp. (NOK). The
    first quarter results will provide a better picture about whether Palm will be
    able to sustain in front of its large competitors who are eating into its market
    share by developing competitive products.

    We have low confidence on the company`s long-term prospects, and therefore
    reiterate our underperform rating on the stock.
    Read the full post here.

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    My oh my, Thursday's earnings call is going to be a good one. Hopefully we'll catch our first glimpses into how well the Pre is selling, and if the company can indeed turn cash-flow positive by the middle of FY2010.

    This particular analyst seems to have a grim outlook on Palm's future.

    What do you think?
  2. cgk
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    #2  
    I think fundamentally the company was about a year too late to market and that let android get established as the 4th OS, a position that palm should have had. The other big problem they have is that they are too closely tied to Spirit - 90% of their revenue comes from one network in one country.

    Having said that, I don't have a good handle on the next couple of years, maybe WEB OS will develop into a big success and overtake some of those other OSes but I'm doubtful. The big problem is that the Palm is such a small company that if the competition get aggressive then they could simply run out of cash trying to keep up.
  3. #3  
    Quote Originally Posted by CGK View Post
    I think fundamentally the company was about a year too late to market and that let android get established as the 4th OS, a position that palm should have had. The other big problem they have is that they are too closely tied to Spirit - 90% of their revenue comes from one network in one country.
    I don't think coming to market earlier would've altered Android's trajectory. It's free and open source, and Palm's is tied to their hardware. Motorola, Samsung, and HTC still would've jumped all over Android anyway. What Palm could've done better is hit the ground running with a full REAL SDK available just prior to launch like Android. It aint there - even 100 days after launch - so that's a big drawback.

    Waiting for a pay catalog isn't an excuse, as Android had almost 1000 apps officially available in their market before they enabled payment, and at the time, they were only on one device on one carrier in the US as well. In fact, Palm will be expanding to multiple carriers and a second device even faster than Android has, and it's still lagging badly.

    Having said that, I don't have a good handle on the next couple of years, maybe WEB OS will develop into a big success and overtake some of those other OSes but I'm doubtful. The big problem is that the Palm is such a small company that if the competition get aggressive then they could simply run out of cash trying to keep up.
    I never saw it "overtaking" any other OSes. Being tied to Palm devices pretty much ensures this won't happen. There'll be 15 or so Android handsets in the market by the time Palm is on their 3rd or 4th WebOS handset. And Windows Mobile, Blackberry, and iPhone have insurmountable (for Palm, at least) volume leads.

    Their health depends on capturing new customers to the smartphone market with cool, stable, easy-to-use devices that provide advantages and value over iPhone. They still have some work to do on that front.
  4. cgk
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    #4  
    I cannot disagree with any of your analysis

    Quote Originally Posted by mikah912 View Post

    Their health depends on capturing new customers to the smartphone market with cool, stable, easy-to-use devices that provide advantages and value over iPhone. They still have some work to do on that front.
    I think it was a bit of a tactical mistake to position the phone as the "not iphone" Apple is a premium brand and palm is em.. something else...

    In the UK, it looks like it will be priced the same as the iphone which is a terrible mistake, it could be made by some Chinese no-name company for the all the brand value Palm have here.
  5. #5  
    I don't think they will release Pre numbers.
  6. #6  
    I don't think the 70% decline in revenue had anything to do with the Pre.. as it stated that it beat Zack's consensus expectations in the fourth quarter which is when the Pre was primarily released. What I gather from the article is that Palm was hurting badly prior to the Pre's release and profits were higher than expected once it was released. The article is predicting that it's basically too little too late despite good Pre sales with upcoming competition from established phones from Apple and Android. This of course is pure speculation on their part. I think we should have some statistics on how successful financial analysts predictions are... if that were the case, I think a lot of them would be out of a job. Lol.
  7. cgk
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    #7  
    What time is this?
  8. cgk
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    #8  
    The company shipped a total of 823,000 smartphone units during the quarter, representing a 134 percent increase from the fourth quarter of fiscal year 2009 and a year-over-year decrease of 30 percent. Smartphone sell-through for the quarter was 810,000 units, up 76 percent from the fourth quarter of fiscal year 2009 and down 21 percent year-over-year.
    Palm, Inc. - Palm Reports Q1 FY 2010 Results

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