Pre boosts Palm smartphone sales 134%

Palm records a big loss and steep revenue decline, but smartphone sales jump on the back of the new Pre.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By David Goldman, CNNMoney.com staff writer

chart_smartphones.gif
palm_pre.03.jpg
Sales of the Pre boosted Palm's overall smartphone shipments by 134% last quarter.
How are you doing financially compared to the start of the year?
  • Better
  • Worse
  • About the same

NEW YORK (CNNMoney.com) -- Palm Inc.'s smartphone sales rose 134% to 823,000 units during the latest quarter on the back of the new Pre, but the company still reported its ninth consecutive quarterly loss and sales fell 81%.

The company also announced that it will offer approximately 16 million shares of common stock for "working capital and general corporate purposes."

Shares of Palm (PALM) fell slightly after rising by as much as 9% after hours.

The much-hyped Pre smartphone helped boost Palm's smartphone shipments from 351,000 in the prior quarter. The company did not separate Pre sales from other Palm phones, but experts forecasted Pre shipments of about 520,000, according to Matthew Thornton, analyst at Avian Securities.

"With the launch of the Pre, we accomplished one of our most crucial milestones," said Jon Rubenstein, Palm's chief executive, on a conference call with investors. "Now we're focused on growth. We're confident we're on the path to success."

Financials: The Sunnyvale, Calif.-based company lost $164.5 million, or $1.17 per share in its fiscal first quarter, ended Aug. 31. That's 293% wider than the $41.9 million loss the company recorded during the same time last year.

Results did not include deferred income of $1.07 per share. Including that revenue, which is deferred over the life of customers' smartphone contracts, Palm said it would have lost 10 cents per share. Analysts polled by Thomson Reuters, who included that income in their estimates, forecasted a loss of 25 cents per share.

Sales fell to $68 million. But the company's sales were also impacted by deferred revenues from phone contracts. If the revenue was not deferred, Palm said it would have taken in $360.7 million of sales, beating analyst forecasts of $291 million in adjusted sales.

Palm has endured a difficult couple of years as its once revolutionary PDA products were outdone by Apple's (AAPL, Fortune 500) iPhone and Research In Motion's (RIMM) BlackBerry. But analysts expect the Pre's new critically acclaimed WebOS operating system will help the Palm become a third major smartphone maker, especially as it offers its new phones on other carriers next year after its exclusive contract with Sprint (S, Fortune 500) expires in 2010.

"We're making significant progress with Palm's transformation, and our culture of innovation is stronger than ever," said Rubinstein. "We're launching more great Palm WebOS products with more carriers, and turning our sights toward growth."

Palm said the company will continue to be impacted by lower demand for its older products, and anticipates adjusted revenue for the current quarter between $240 million and $270 million. That's significantly lower than the $397 million analysts expected.

Palm said its overall shipment numbers for the current quarter would likely have been even higher, but said the Pre cannibalized sales of the company's older phones like the Treo and Centro.

Outlook: Palm said the company's more distant future is much brighter. Palm plans to launch more products with additional carriers starting in 2010, and anticipates full-year revenue will be between $1.6 billion and $1.8 billion, topping analysts' forecast of $1.58 billion.

"Palm wound down its old operations that were unprofitable and really built its new business around WebOS," said Thornton. "The legacy products are still part of the mix, which are weighing on the company's margins."

Thornton said WebOS has legs, and Palm will likely introduce several new phones on that platform in the coming quarters. Last week, Palm unveiled its new Pixi phone, which is a smaller version of the Pre and will go on sale later in 2009.

But the company also announced that it had cut the Pre's price last week after just three months on the market, worrying some analysts that sales were dropping off.

Palm's stock has soared 359% this year after the company first unveiled the Pre in January. Still, some analysts argue the stock is undervalued for a company of great potential, and with a market capitalization of just $2 billion, an acquisition can't be ruled out.

"If someone is looking to get into the smartphone game, there's some logic to acquiring the Pre," said Thornton. "They have the distribution, and recognizable brand and a good competitive platform." To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Sponsors
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.