Tuesday, March 3, 2009

Palm Reports Preliminary Q3 FY09 Results


Earlier today, Palm released their preliminary results for their Q3FY09 period which ended back on February 27. The news doesn't look good.

Palm states that they are on target to end the quarter somewhere between $85 to $95 million dollars. The reasons for such a low earning quarter? According to Palm, there is continuing decline for the company's "maturing legacy smartphone products," a sluggish economy, and "later-than-expected shipments" of the Treo Pro in the United States.

Allow me to translate: Palm isn't selling the Treo 755p and Centro anymore; people are worried about paying for the essentials - not smartphones; and Palm and Sprint can't get the Windows Mobile Treo Pro, which has completely overshadowed the Treo 800w, certified and out the door.

The silver lining in all of this is that the company is reporting that the new webOS-powered Pre is still on target for a launch in this half of 2009.
"The much-anticipated launch of the Palm Pre remains on track for the first half of calendar year 2009, but as expected we've got a difficult transition period to work through," said Palm President and Chief Executive Officer Ed Colligan. "Despite the challenging market environment, the extraordinary response to the Palm Pre and the new Palm webOS reaffirms our confidence in our long-term prospects and our ability to reestablish Palm as the leading innovator in the growing smartphone market."
And speaking of webOS, a small little nugget was dropped in today's statement.
"Separately, Palm indicated that since it expects to periodically provide new software features free of charge to customers of its Palm webOS products, including the recently announced Palm Pre, it will recognize the revenues and cost of revenues associated with Palm webOS product sales on a straight-line basis over the product's estimated economic life of 24 months. The company will be recording deferred revenues and deferred cost of revenues on its balance sheet, and amortizing them into earnings on a straight-line basis over the estimated economic product life of 24 months. The company will continue to expense engineering, sales and marketing costs as they are incurred. This accounting treatment will have no impact on cash flow."
From that statement, we can draw the conclusion that Palm might be returning to a position that the company held years ago to provide free software updates to customers. It also indicates that the Pre will have a service life of about two years.

Palm will be reporting their full Q3FY09 results on Thursday, March 19. A conference call will be held at 4:30pm ET/1:30pm PT.

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