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  1.    #1  
    I posted this in comments on the blog and thought I would share it here as well:

    Before I put my comment here, I would first like to say that I have been happy with Palm's financials since last summer, and have made my comments accordingly on this fine blog. So keep that in mind as I lay this out.

    This conference call comes down to 2 things:

    1.) The Good: Profits, Debt, and Cash. Really very good considering where Palm has come from. I have been upbeat about Palm's position to this point because in the _long_ term these are the things you must take care of to turn (and stay) positive.

    2.) The Baaaad, ugly, scary: Inventory. I have tried to watch very carefully the inventory numbers, and this has been my area of concern all along. Excess inventory kills your business today, like NOW, in the _short_ term.

    That's why they've had to cut margins. 15% is a retail high volume type of margin where you turn your inventory 6+ times a year; in wholesale, 15% is nothing; no profit at all after overhead, interest, etc.

    More than a quarter's worth of last year's inventory in the pipe means that Palm is going to have to cease production of all current SKUs just to have enough working capital to develop and produce their new hardware. My guess is that it was partly Palm's decision that is responsible for the delayed launch on ATT. They simply cannot afford to build units for ATT right now.

    This is a huge mistake on Palm's part. Too much optimism in launching on Verizon, bad initial marketing, and tougher competition from the Droid and others play into it, but really the problem is in supply chain management: not scaling the production (or not having the flexibility) to just meet demand. I have felt that in the last 3 quarters that Palm was doing this well. We will have to wait and see if they can get back on track.

    I'm actually glad to hear Rubenstien's obvious disappointment. Hopefully he will learn quickly from this mistake and make better decisions in the future from it. This has to be a major setback for Palm for now. How they deal with it will be determine their future. If they do badly, Palm as we know it will cease to exist in less than a year. If they do well, the sky is still the limit.

    As an investment, I am maintaining a buy position on Palm. Anything less than $6 is a bragain.

    I would also like to see Palm be more aggressive in making some new partnerships. I know they seem to want to go it alone for now, but if I were Rubenstein, my first call tomorrow morning would be to "my old dear friend, Steve...Balmer!" =)
  2. #2  
    Quote Originally Posted by amateurhack View Post
    More than a quarter's worth of last year's inventory in the pipe means that Palm is going to have to cease production of all current SKUs just to have enough working capital to develop and produce their new hardware. My guess is that it was partly Palm's decision that is responsible for the delayed launch on ATT. They simply cannot afford to build units for ATT right now.
    If only they went with my original prediction that the O2 units were 850/1900/2100 UMTS. Probably would be a few bucks extra per phone, but they would've easily repurposed any unsold O2/Telefonica stock for AT&T and Rogers without having to redesign one. Less SKUs, just one instead of one for NA and one for EU. Another beauty of GSM... try doing that with CDMA.
    Palm IIIc -> Sony CLIÉ T650C -> Sony TJ-37 -> Palm TX -> Palm Centro -> Palm Pre Bell -> Palm Pre Plus Bell/Verizon Hybrid -> HP Veer -> HP Pre 3 NA -> BlackBerry Classic -> BlackBerry Priv

    It's a Late Goodbye, such a Late Goodbye.

    Need OEM Palm Pre parts? See here
  3. cgk
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    #3  
    Quote Originally Posted by amateurhack View Post

    I would also like to see Palm be more aggressive in making some new partnerships. I know they seem to want to go it alone for now, but if I were Rubenstein, my first call tomorrow morning would be to "my old dear friend, Steve...Balmer!" =)
    Why would Microsoft be interested in a partnership with Palm at this point?
  4. #4  
    Quote Originally Posted by CGK View Post
    Why would Microsoft be interested in a partnership with Palm at this point?
    Well for one main reason....it would hit Apple in the "apples", and Microsoft can have a bigger market share.

    I mean that would be great...ex-Apple employee now working with Apples main competition in the PC world at least. So now Microsoft would have big shares in PC and smartphones...TAKE THAT APPLE!

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