Goldman Sachs Estimates 670k Pres Sold & Nov. Release of Pixi

[SharonW]

This is what I was thinking given the lowered guidance for Q2. A later launch date for the Pixi combined with ramping up of production and marketing. Being that Palm's Q2 ends on Nov. 30th, the full impact of sales from the Pixi wouldn't show up in this quarter while development and production, as well as marketing expenses for it would.

Sent: Thursday, September 17, 2009 4:20 PM

Subject: Palm, Inc. (PALM): Strong results and FY10 guide; equity raise should help fund growth


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Palm, Inc. (PALM): Strong results and FY10 guide; equity raise should help fund growth

Goldman Sachs Global Investment Research September 17, 2009
COMPANY UPDATE Neutral
Palm, Inc. (PALM) [$14.66]

Strong results and FY10 guide; equity raise should help fund growth

What’s changed

Palm reported solid F1Q non-GAAP sales/EPS of $361mn/($0.10), above GS at $340mn/($0.20) and the Street at $291mn/($0.25) on much stronger than expected Pre shipments. We estimate Pre shipments of 670k, compared to GS/Consensus at 640k/550k. The company provided F2Q (Nov) sales guidance of $240-270mn, compared to GS/Consensus estimates of $424mn/$347mn, and FY10 (May) guidance of $1.6-1.8bn, compared to GS/Consensus of $1.9bn/$1.6bn. In addition, Palm announced an equity offering of 16mn shares for working capital & general corporate purposes.

Implications

On balance, we view Palm’s results and guidance positively, as solid F1Q results and FY10 guidance more than offset disappointing F2Q guidance. We think the significant QoQ sales decline expected in F2Q is due to the timing of the Pixi launch (which we now expect in November vs. October previously), and declining Palm Pre and Treo Pro sales as those product cycles mature.

However, Palm’s full year guidance implies a very significant ramp in the February and May quarters, likely driven by the ramp of Pixi at Sprint, Palm Pre at Verizon, and potentially other carriers. We are lowering our FY10 non-GAAP EPS to $0.09 from $0.28 given weak F2Q guidance, but leaving FY11 at $0.77 (Street $0.42) and FY11 at $1.10. Separately, we view Palm’s equity offering, in conjunction with its recent price cut of the Pre at Sprint to $149 from $199, as an indication that the company is aggressively targeting volume growth, as reaching scale in the smartphone business is more important at this stage than margins.

Valuation

There is no change to our 12-month price target of $15, based on 25X our non-GAAP CY10 EPS estimate (including ESOs) of $0.60.

Key risks

Downside risks relate to execution and competition, while upside risks stem from faster than expected WebOS adoption or a take-out.

Investment list memberships
Neutral
Coverage View: Attractive
United States. Communications Technology

[jbg7474]

Very interesting, thanks! I wonder how they arrived at their estimate of Pre's sold. Your math from one of the other threads was somewhat persuasive, but it still baffles me as to why Palm didn't release Pre numbers if they beat 550k. Perhaps they felt like they didn't meet expectations if they didn't reach 750k?

[SharonW]

Originally Posted by jbg7474

Very interesting, thanks! I wonder how they arrived at their estimate of Pre's sold. Your math from one of the other threads was somewhat persuasive, but it still baffles me as to why Palm didn't release Pre numbers if they beat 550k. Perhaps they felt like they didn't meet expectations if they didn't reach 750k?

I'm suspecting, as I've speculated before, that it has nothing to do with Palm and everything to do with Sprint. Frankly, I'm quite surprised that analysts haven't thought of this themselves.

I believe that Palm's contract for exclusivity and length of term is dependent on how many Pres Sprint is able to sell. If they don't meet certain targets in certain time frames then Palm becomes to free to offer their webOs line up to other U.S. carriers.

This would explain AT&T and Verizon jumping on the bandwagon when the Pre was first coming out to say that they, too, would eventually be carrying it or like-devices soon. Then Sprint asserted that they had (and watch the choice of words) "exclusivity for at least six months." The "at least" was repeated by almost every representative from Sprint, not the least of which was Dan Hesse.

Further, I imagine that under the terms of their mutual Non-Disclosure Agreements, there was an inclusion as to have neither company disclose exact figures of Pres sold. This would be to Sprint's benefit so that the competition do not know how soon or close they might be to getting Palm devices nor what kind of sell-through they might have thus way-siding a negotiation tactic for the competition. Additionally, if Pre and additional webOs device sales were excellent while Sprint's subscriber retention efforts still were lagging this would further exacerbate Sprint'sr perceived weaknesses in the telecom arena.

Such a non-disclosure and exclusivity dependent constraint would also explain why new Palm webOS devices are already appearing in Verizon's databases even though they seem months away from getting their hands on any devices. They've prepared given there are probably normally known contract volume standards within the industry so they had to be prepared in the event that Sprint did not meet the sales goals in their contract with Palm.

I also wonder whether the rapid fall-off in Treos and Centros which are sold across multiple carriers plays any part in this, but that's more of an aside thought.

[Really mobile]

I think Palm wants to wait until Pre sales hit 1MM before releasing any sales numbers.

[SharonW]

What I also find interesting, or just indicative of the laissez-faire analysis conducted by analysts is that nobody seemed to notice the difference between the sell-in rate of 823,000 versus the sell-through rate of 810,000. It is my understanding, and I could be wrong, that sell-in is the figure showing the number sold to the carrier, i.e. sold into the channel, and that sell-through is the actual number sold to the subscriber. If so, the disparity is remarkably tight and would mean that with the exception of 13,000 units, every phone they've produced has been sold.

This flies in the face of all those analysts who were saying that the Pre was languishing on store shelves.

Moreover, it would also explain why Best Buy, Radio Shack, Walmart and Amazon hadn't shown full-blown advertising positioning for the Pre on the web or in their fliers (for Best Buy and Radio Shack) until the last couple of weeks. This week was the first time I could find an available Pre on Amazon WITHOUT entering my zip code which means that availability was limited and they were constraining shipments to areas more lacking in stock.

I don't think I've ever seen a Pre in either a Radio Shack, Best Buy or Walmart flier here in CT. I know because I look.

I think that supply constraints existed for most of the last three months and only recently broke through to a more balanced available inventory.

[gbp]

Thanks, this is much better than THE 500k number.

[s219]

Originally Posted by SharonW

What I also find interesting, or just indicative of the laissez-faire analysis conducted by analysts is that nobody seemed to notice the difference between the sell-in rate of 823,000 versus the sell-through rate of 810,000. It is my understanding, and I could be wrong, that sell-in is the figure showing the number sold to the carrier, i.e. sold into the channel, and that sell-through is the actual number sold to the subscriber. If so, the disparity is remarkably tight and would mean that with the exception of 13,000 units, every phone they've produced has been sold.

This flies in the face of all those analysts who were saying that the Pre was languishing on store shelves.

Moreover, it would also explain why Best Buy, Radio Shack, Walmart and Amazon hadn't shown full-blown advertising positioning for the Pre on the web or in their fliers (for Best Buy and Radio Shack) until the last couple of weeks. This week was the first time I could find an available Pre on Amazon WITHOUT entering my zip code which means that availability was limited and they were constraining shipments to areas more lacking in stock.

I don't think I've ever seen a Pre in either a Radio Shack, Best Buy or Walmart flier here in CT. I know because I look.

I think that supply constraints existed for most of the last three months and only recently broke through to a more balanced available inventory.

Palm is like Apple in the sense that they don't sit on inventory and they can tailor production on a short term basis; in both cases, you can expect the difference between sell-in and sell-through to be small. That's just a reality of the system, independent of overall or long-term supply-demand numbers.

We just can't conclude anything (pro or against your theory) with overall numbers. I think the best we can say is that supply is not outpacing demand by a whole lot when spread over the quarter. It doesn't really tell us if the Pre was languishing on shelves, day to day, during the middle of the quarter, or not.

I will say this, if they were having trouble keeping up with demand, we surely would have heard about it during the conference call. While it's not a 100% bragging point (since it may indicate they didn't plan properly or setup sufficient production), companies almost always trumpet when they are having trouble keeping up with demand.

I think if you look at the lack of specific numbers and milestone press releases, the price cuts, and the fact that Palm acknowledged that they had demand from the Sprint and Bell launches but lower sales inbetween (which forms the basis of their lowered guidance for the current quarter), it suggests the device wasn't selling as well as they had hoped. I think you'd have to be a real optimist to see it the other way around.

[SharonW]

Originally Posted by s219

Palm is like Apple in the sense that they don't sit on inventory and they can tailor production on a short term basis; in both cases, you can expect the difference between sell-in and sell-through to be small. That's just a reality of the system, independent of overall or long-term supply-demand numbers.

We just can't conclude anything (pro or against your theory) with overall numbers. I think the best we can say is that supply is not outpacing demand by a whole lot when spread over the quarter. It doesn't really tell us if the Pre was languishing on shelves, day to day, during the middle of the quarter, or not.

I will say this, if they were having trouble keeping up with demand, we surely would have heard about it during the conference call. While it's not a 100% bragging point (since it may indicate they didn't plan properly or setup sufficient production), companies almost always trumpet when they are having trouble keeping up with demand.

I think if you look at the lack of specific numbers and milestone press releases, the price cuts, and the fact that Palm acknowledged that they had demand from the Sprint and Bell launches but lower sales inbetween (which forms the basis of their lowered guidance for the current quarter), it suggests the device wasn't selling as well as they had hoped. I think you'd have to be a real optimist to see it the other way around.

I don't think I'm being overly optimistic. I think that without easy answers (give me exact Pre sales numbers or nothing), analysts and other people such as yourself remain doubtful as it is the path of least resistance and effort. Considering the very, very tight supply constraints that plagued the entire first month of the launch which they knew would exist, so much so in advance, that Sprint didn't even majorly launch their ad campaign, I find it unreasonable to assume that at any point in the quarter that Pres "languished on store shelves" with the added backup to my reasoning being the sell-in/sell-through difference and the final sales numbers.

Regarding the rest of your post, please refer back to the original post and my second post on the subject. Goldman references the price cut (gain faster traction in adoption over preserving margins) as a leg up on new on-coming competition that is all hitting at the same time during the holiday season. The pre-holiday season would be another reason for somewhat more limited demand during Q2. The summer contained back-to-school sales on top of the launch. Palm's Q2 (Sept.-Nov.) unlike most others Q2 (I can't help but think that most don't take this into consideration as it doesn't include the Santa factor) is without any notable shopping event/holidays.

You sound clearly intelligent and knowledgeable enough to also agree that NDA's between Sprint and Palm would be, not only, a reasonable explanation for a non-breakout of numbers, but given Sprint's situation, quite likely. I would like to hear more from you regarding that particular post to flesh out your entire hypothesis as I think I've laid out quite a few examples of known and demonstrated behaviors on the part of all carriers that support my reasoning.

[gbp]

Originally Posted by s219

I will say this, if they were having trouble keeping up with demand, we surely would have heard about it during the conference call. While it's not a 100% bragging point (since it may indicate they didn't plan properly or setup sufficient production), companies almost always trumpet when they are having trouble keeping up with demand.

I think if you look at the lack of specific numbers and milestone press releases, the price cuts, and the fact that Palm acknowledged that they had demand from the Sprint and Bell launches but lower sales in between (which forms the basis of their lowered guidance for the current quarter), it suggests the device wasn't selling as well as they had hoped. I think you'd have to be a real optimist to see it the other way around.

SPRINT CEO said during last earnings call that the inventories were low and demand was high.
Regarding PALM's lower guidance , they are expecting Pixie to sell well while Pre sales become stagnated. Pixie is cheaper phone than Pre, thus the lower revenue guidance. Also PALM will be spending money ( the little they have left) on marketing for the rest of the year.

Come 2010 , things will be better for PALM.
Verizon will start selling the Pre. Based on SPRINT sales ( 500K -600K plus ) PALM might sale a million Pres on Verizon.

I am not sure why I wouldn't be an optimist.

[gbp]

Originally Posted by SharonW

You sound clearly intelligent and knowledgeable enough to also agree that NDA's between Sprint and Palm would be, not only, a reasonable explanation for a non-breakout of numbers, but given Sprint's situation, quite likely. I would like to hear more from you regarding that particular post to flesh out your entire hypothesis as I think I've laid out quite a few examples of known and demonstrated behaviors on the part of all carriers that support my reasoning.

Agree , the sales number will never be publicized.
I am still waiting for the SAMSUNG Instinct numbers .

Folks need to work on indirect methods such as no of APPS downloaded, Web traffic trends ... and such to predict the Pre sales numbers.

[s219]

Originally Posted by SharonW

I don't think I'm being overly optimistic. I think that without easy answers (give me exact Pre sales numbers or nothing), analysts and other people such as yourself remain doubtful as it is the path of least resistance and effort.

That is true. If you just go on facts and do no extrapolation, it naturally leads to the pessimistic view in this case. I can't even pump much thinking into it, as it just leads farther away from what we know / don't know. So if I was a cautious investor, or in my case a cautious developer trying to gauge the platform, I am sort of left with the facts as they are, and that leads to the pessimistic view.

You sound clearly intelligent and knowledgeable enough to also agree that NDA's between Sprint and Palm would be, not only, a reasonable explanation for a non-breakout of numbers, but given Sprint's situation, quite likely. I would like to hear more from you regarding that particular post to flesh out your entire hypothesis as I think I've laid out quite a few examples of known and demonstrated behaviors on the part of all carriers that support my reasoning.

An NDA is generally intended to protect intellectual property, proprietary information, or stuff that hasn't been patented but needs to be exchanged between partners, so I don't think that enters into sales info specifically. They may have other contracts in place that govern this. But I keep coming back to the idea that if they had something good to announce, they would have. That's practically a tenet of publicly traded companies pushing new products.

Now the funny thing is, sales of 500-600K Pres is good news in some circles. Why wouldn't they want to tout this? Even if it wasn't blockbuster sales, they could spin it favorably.

So I feel like I'm left with a lack of aggressively-spun good news, and lowered guidance going forward.

[donm527]

So many good points to take in and crunch. But I was thinking... they could say that it did hit Goldmans higher number of 670k units for the quarter and after some time thinking about it, I would come with the 'feeling' that it still below 'my' expectations and the Pre launch was a fail. Even though it may have helped Sprint reach new highs for smartphone sales I imagine they believe its a fail too because of what the phone was representing... a heads up alternative to the iPhone.

Now my thoughts come from the belief that this was going to be the next 'iPhone killer'... meaning I didnt expect to overtake them out of the gate, but I expected them to come out strong, and keep accelerating at a faster pace and goign strong all year and not expecting a price reduction on the product. Yes, I expected to hear sales of ONE MILLION at least at some time DURING the quarter or at the end. I don't think it's such a high number to hope for. I am not basing the number from iPhone sales and expect them to sell at their rate, I based it on the last labeled "next iPhone killer" the BB Storm... They sold 500,000 in the first month of sales and hit a million in around two. That's why I am a little harsh in saying fail because it couldnt even outsell the Storm which I think sucks.

And now if you look back and see where the Storm is and how it's perceived among it's peers... it's back in the pack of other phones and not even a consideration against iPhone or Pre. Being with Sprint is a limitation and some may say you can't expect a million people to have been added through Sprint but why not? You have the best plans and if you have the best phone then people will jump or not hard to think they would.

I am not sure how much to put blame on Sprint. I think they definitely dropped the ball on marketing the phone. I don't think Palm liked the idea of dropping the price on Pre cause it's got to hurt profit but probably a Sprint move because sales becoming "stagnant" and for me a sign that they are treating their phone like all their other phones.

I think Palm failed too a little with their marketing with those silly freak girl commercials and maybe not under their control but fail in not having the app store out which I think would have avoided sales going stagnant or have GS mention maturing product cycle after only three months. But they have sold enough to where people can safely say they have time now until they can release to other carriers.

Going forward, for Palm to increase sales, they need to get the App store rocking ASAP and get some awesome apps to generate the excitment and keep the phone fresh and give them momentum until they can release the Pre to Verizon/ATT in June of 2010 and finally get from under Sprint. Yes, they needed Sprint but I think they are seriously hurt by being stuck with them and not a good relationship. By that time the Pre will be one year old and that means other carriers will start off with Pre2 or equivalent. If they can work out all the bugs in WebOS and add in all the feature missing (no more excuses of first gen and iPhone not having features back then) and promised by then and also have the App store rocking, then it will be like a second rebirth and they can come out on the new carriers the way they should have the first time and take some significant market share.

App store must come out ASAP and both Sprint and Palm have to start advertising the heck out of it to drive up excitement.

And Palm needs to let go of iTunes... really.

[Kupe]

Originally Posted by SharonW

What I also find interesting, or just indicative of the laissez-faire analysis conducted by analysts is that nobody seemed to notice the difference between the sell-in rate of 823,000 versus the sell-through rate of 810,000. It is my understanding, and I could be wrong, that sell-in is the figure showing the number sold to the carrier, i.e. sold into the channel, and that sell-through is the actual number sold to the subscriber. If so, the disparity is remarkably tight and would mean that with the exception of 13,000 units, every phone they've produced has been sold.

In general, this might be true of a low-return-rate (i.e. 1%) product. What this doesn't take into account is the number of phones in refurb limbo.

Sell in = Pres shipped by Palm
Sell through = Pres sold by retailers (Sprint, BB, Radio Shack)
Refurbs, on the other hand, are phones in channel that have already been tagged as sell-in and sell-through, but generate no revenue either in sales or in monthly fees. The 13,000 Pre difference is most certainly new stock at retailers (which adds up to a fraction over one new Pre per retail outlet when you add up all the potential sites), but doesn't account for the refurbs moving around through the system. At a mere 5% return rate (an industry low), that would account for another 25,000-34,000 Pres (based on 500,000 to 680,000 sold) not generating any sales or monthly revenues for Sprint or Palm. The number of refurbs is probably higher than that (for example this link which would make the refurb numbers closer to 50,000-75,000 total). That's a lot of phones in the system not generating $100 in monthly revenues, but sucking up shipping, repair, storage, and inventory costs.

Just a thought.

[SharonW]

Originally Posted by s219

That is true. If you just go on facts and do no extrapolation, it naturally leads to the pessimistic view in this case. I can't even pump much thinking into it, as it just leads farther away from what we know / don't know. So if I was a cautious investor, or in my case a cautious developer trying to gauge the platform, I am sort of left with the facts as they are, and that leads to the pessimistic view.



An NDA is generally intended to protect intellectual property, proprietary information, or stuff that hasn't been patented but needs to be exchanged between partners, so I don't think that enters into sales info specifically. They may have other contracts in place that govern this. But I keep coming back to the idea that if they had something good to announce, they would have. That's practically a tenet of publicly traded companies pushing new products.

Now the funny thing is, sales of 500-600K Pres is good news in some circles. Why wouldn't they want to tout this? Even if it wasn't blockbuster sales, they could spin it favorably.

So I feel like I'm left with a lack of aggressively-spun good news, and lowered guidance going forward.

Well, I believe that people are NOT considering all the facts at hand, just the ONE missing, i.e. exact Pre sales. The first facts we have are what Palm sold in the prior two quarters. In Q3 2009, they sold 480,000 Palm OS phones, in Q4 2009 they sold 353,000 Palm OS and and some in-channel Pres estimated between 70,000-130,000, so call it in between at 100,000 leaving only 253,000 OS phones. That's a quarter over quarter drop of almost 50% for old OS phones!!! Now since they did say they are still seeing big declines in the sales of their old OS phones, one can assume that they sold even LESS than 253,000 OS phones in Q1 2010.

The only extrapolation needed at this point is what is the current rate of decline in the old OS line. It isn't hard to get to GS's estimate of 670,000 if old OS declines were still maintaining a roughly 50% decline. Moreover, if you add back in the 100,000 Pres sold in the previous quarter to GS's Q1 figure you'd have total Pre sales of 770,000.

Other facts to consider include Nokia's recent Q2 2009 sales as they represent more legacy mid-range products. Nokia saw a 27% decline in sales year over year and only a modest 6% increase quarter over quarter and that's with world-wide sales. Palm just posted a 135% increase quarter over quarter.

However, I also agree that even if sales were in the more modest area of over half a million that would still be excellent for a brand new OS without any established recognition like Apple or Blackberry and they'd want to tout it. The fact that they haven't leads me right back to the NDA, of which you are incorrect in assuming it only covers stuff like IP, proprietary or patent information.

Being a developer that is probably the type of NDA you've encountered, but they are far more broad than that. From Wikipedia:

A non-disclosure agreement (NDA), also known as a confidentiality agreement, confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement, is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to by third parties. It is a contract through which the parties agree not to disclose information covered by the agreement. An NDA creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets. As such, an NDA protects non-public business information.

Some common issues addressed in an NDA include:[4]
• outlining the parties to the agreement;
• the definition of what is confidential, i.e. the information to be held confidential. Modern NDAs will typically include a laundry-list of types of items which are covered, including unpublished patent applications, know-how, schema, financial information, verbal representations, customer lists, vendor lists, business practices/strategies, etc;

I further offer you this for consideration as a basis for the existence of this type of NDA between carriers and cell phone makers:

Is Motorola Getting Cranky at Verizon Over Android?

...When Motorola announced the Cliq last week, many observers thought they would announce two Android phones. The two phones were supposed to be the T-Mobile Cliq and a long-awaited Motorola Android phone for Verizon Wireless, which pretty much everyone in the industry knows is coming.

But the Verizon phone never showed, and Verizon isn't talking about it.

...Jha's agreement with Verizon - assuming there is one - has gagged him; he can't talk about his Verizon deal. So he's left saying his company is "fairly hopeful we will begin to engage with all the U.S. operators." What he's probably thinking, meanwhile, is, "where the heck is our Verizon phone?"

Is Motorola Getting Cranky at Verizon Over Android? - News and Analysis by PC Magazine

[SharonW]

Originally Posted by Kupe

In general, this might be true of a low-return-rate (i.e. 1%) product. What this doesn't take into account is the number of phones in refurb limbo.

Sell in = Pres shipped by Palm
Sell through = Pres sold by retailers (Sprint, BB, Radio Shack)
Refurbs, on the other hand, are phones in channel that have already been tagged as sell-in and sell-through, but generate no revenue either in sales or in monthly fees. The 13,000 Pre difference is most certainly new stock at retailers (which adds up to a fraction over one new Pre per retail outlet when you add up all the potential sites), but doesn't account for the refurbs moving around through the system. At a mere 5% return rate (an industry low), that would account for another 25,000-34,000 Pres (based on 500,000 to 680,000 sold) not generating any sales or monthly revenues for Sprint or Palm. The number of refurbs is probably higher than that (for example this link which would make the refurb numbers closer to 50,000-75,000 total). That's a lot of phones in the system not generating $100 in monthly revenues, but sucking up shipping, repair, storage, and inventory costs.

Just a thought.

Even if returns rates were that high, Palm's huge increase in non-GAAP revenues from $113 million in Q4 2009 to $360 million in Q1 2010 would belie that conjecture. Moreover, the monthly revenues generated from ownership go to Sprint, not Palm since no app sales are included which would be the only monthly income they receive outside of sales.

[s219]

SharonW, I'm just saying, an NDA is entered into *before* one party discloses sensitive information to another party. In the case of sales numbers between Palm and Sprint, I am fairly certain they both have their own inventory tracking systems, so they independently know the sales numbers. There would be no point in one of the parties asking the other to sign an NDA in that case, since the info is not private to just one party. However, Palm and Sprint may well have a contract clause that says neither company can release sales numbers without the other's consent. That makes more sense.

Even in cases where NDAs are used to protect financial or sales info, it's only done for info that is privy to just one of the parties. For instance, Palm might ask for an NDA if they were pitching a phone to Sprint and that pitch included confidential sales data from other devices. That's a perfect situation for an NDA.

[SharonW]

Originally Posted by s219

SharonW, I'm just saying, an NDA is entered into *before* one party discloses sensitive information to another party. In the case of sales numbers between Palm and Sprint, I am fairly certain they both have their own inventory tracking systems, so they independently know the sales numbers. There would be no point in one of the parties asking the other to sign an NDA in that case, since the info is not private to just one party. However, Palm and Sprint may well have a contract clause that says neither company can release sales numbers without the other's consent. That makes more sense.

Even in cases where NDAs are used to protect financial or sales info, it's only done for info that is privy to just one of the parties. For instance, Palm might ask for an NDA if they were pitching a phone to Sprint and that pitch included confidential sales data from other devices. That's a perfect situation for an NDA.

NDAs are a matter of course when two parties enter into almost ANY agreement. The exclusivity arrangement is such an agreement. The portion of your post that I have bolded is exactly what I was saying. I'm not quite sure why you thought otherwise, except that you still seem to have a limited view of what NDAs do, let alone how that might be built into an exclusivity agreement. In no way are NDAs limited to information one party possesses. I have no idea why you even think that other than, like I previously said, your limited exposure to NDAs as a developer.

Let me reiterate the pertinent portion of Wikipedia's explanation:

"confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to by third parties. It is a contract through which the parties agree not to disclose information covered by the agreement."

Therefore, assuming you now understand the broad nature of NDAs, you are in essence, agreeing with me. Regardless of whether you choose to view it as an NDA clause or some other exclusivity of information arrangement, you agree with the pertinent essence of my post...that they could have jointly signed an agreement to NOT discuss particular sales numbers without the others consent. Right?

[gbp]

Originally Posted by SharonW

Well, I believe that people are NOT considering all the facts at hand, just the ONE missing, i.e. exact Pre sales. The first facts we have are what Palm sold in the prior two quarters. In Q3 2009, they sold 480,000 Palm OS phones, in Q4 2009 they sold 353,000 Palm OS and and some in-channel Pres estimated between 70,000-130,000, so call it in between at 100,000 leaving only 253,000 OS phones. That's a quarter over quarter drop of almost 50% for old OS phones!!! Now since they did say they are still seeing big declines in the sales of their old OS phones, one can assume that they sold even LESS than 253,000 OS phones in Q1 2010.

The only extrapolation needed at this point is what is the current rate of decline in the old OS line. It isn't hard to get to GS's estimate of 670,000 if old OS declines were still maintaining a roughly 50% decline. Moreover, if you add back in the 100,000 Pres sold in the previous quarter to GS's Q1 figure you'd have total Pre sales of 770,000.

I agree with your numbers.
I was thinking along the same lines, 250K phones in the last quarter. And 800K plus in the current quarter.

The last quarter had PALM Centro, Treo Pro, 800W and 700P.

700P was on Verizon and SPRINT while the 800W was on SPRINT.
Both of these models are now discontinued.
Plus Centro sales are slowing down ( how much ?? I don't know).

Assuming that they had 100K sales drop from older phones.
The net is 820K - 150K ,

Me thinks Pre sold close to 700K.
Which is why Jon Rubinstein was all smiles. He said "it is selling well".

While 700K is small compared to the iPhones are BBs , its 700K people you can write APPS for :-).

Assuming you can sell a .99 cents app, you are going to make 70% of the 700K.

Thats a decent number. And it will only go upwards to couple of millions in a year ( Don't forget Verizon will be getting Pre and ATT might get Pixie).

[s219]

I don't want to get sidetracked by this. But as I mentioned, Palm and Sprint independently know the inventory and sales numbers. It can be considered joint information. They do not have to "share" the information with each other, thus an NDA is not relevant to this situation.

NDAs are used when one party has private information that it wants to share with a second party, but require that the second party not disclose it with third parties. Emphasis on "share". The NDA is put in place before the information is shared.

They may have a contract agreement to not release joint sales numbers. That is not the same as an NDA. NDAs are only used when the information is initially private to just one of the parties.

[jbg7474]

You're already sidetracked by it. Just because Palm has an independent way to get the information doesn't mean that the information can't be covered by an NDA. An NDA is merely an agreement not to disclose some information. Doesn't matter who had it when (unless it's already public, obviously). In fact, the entrance into an agreement which requires an NDA often means that both parties will have ways to get information separately. That doesn't nullify the fact that they agreed not to disclose certain information before it existed.

An NDA is a legal contract. It can cover whatever it wants, even if both parties had the information to begin with.