RSSWill Palm survive until the Pre launch?
By Angela Gunn | Published March 3, 2009, 7:55 PM
Palm on Tuesday issued the kind of preliminary earnings data that illustrates just how much the company depends on a successful Pre launch for its continued survival -- and how much the firm is betting on a win for the wildly anticipated smartphone.
The company says that for the third quarter of 2009, which ended for Palm on February 27, it expects to report revenues of between $85 million and $90 million. Operating expenses were between $95 million and $100 million. Factors cited included late shipment of the Treo Pro and the general economic situation.
But the company also cited "reduced demand for Palm's maturing legacy smartphone products" -- a significant nod to the effect the Pre announcement has had on the market for Palm's older, non WebOS-based models.
That's not a surprise, but another looming Pre effect on revenue reports is. Palm said in its statement that 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."
That's an accounting treatment and has no effect on actual cash flow, but it won't exactly soothe the nerves of itchy investors.
This quote probably won't either: "Although Palm believes it has sufficient cash, cash equivalents and short-term investments to meet its working capital needs under its current operating plan, the company intends to strengthen its working capital position given the challenging economic environment and the opportunity to drive both the launch of the Palm Pre and future product-development efforts. The company is currently evaluating options in this regard, including the exercise of its right to direct the remarketing of a portion of the common shares underlying the Series C preferred stock and warrant units owned by Elevation Partners. Palm is entitled to retain any net profits realized from such remarketing."
Palm's Q3 earnings call is on March 19.
Palm is backed by several very savvy investment groups who might pony up the cash to keep them floating until the Pre has launched. Of course, this is all bookwork and it may not even be necessary. The just need to keep things running full steam.
I really doubt their demise is in the future. The Pre has got a lot of steam behind it and they simply need to meet their first half of 09 target to reap the rewards of the launch. I don't think there is a single investor who would pull the plug (even in this economy) and demand repayment knowing that the Pre is in the pipeline.
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|Certainly in the case of the 24-month accounting, it's bookwork, but a market this stupid can get stupid about anything. Elevation and other investors are smarter than that, though I'd characterize them as three quarters' worth of smart at best.
A successful launch will make up for just about everything, but that means *everything* successful -- no supply-line glitches, no bizarre post-launch bugs with funky stuff like that curved slide, Sprint performing beautifully (yeah, out of Palm's control, but they chose their dance partner), curated apps store ready to rock, software developers ready to shine. It's not impossible, but it's not a sure bet by any means. I anticipate a couple of truly crazy workdays for everyone at Betanews (and elsewhere in the tech-journalism galaxy) when it launches.
And if Palm pulls this off, Las Vegas ought to seriously consider banning Ed Colligan and the gang from getting within fifty feet of the gaming tables -- no one in their right mind would want to gamble against guys with nerves of titanium. OTOH, if it doesn't fly, I think we have a might-have-been legend in the making -- up there with what-if-the-Newton-had-succeeded, or what-if-Gary-Kildall-hadn't-left-the-IBM-negotiations-to-Dorothy.
And heavens, am I curious to hear the sales numbers for the Treo Pro. That timing *can't* have been intentional. I refuse.
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|The Treo Pro has to be the worst timed launch of any product in recent memory. How many people are going to plunk down for another WinMo product when the Pre is sitting in the queue. Let's hope that Palm reduced the build numbers on this product and have an early demise of the WinMo version in their forecasts. I do imagine that the form factor might survive with WebOS on it.
I know their are a lot of things that have to go right to make this launch successful but Palm has been staying in the game a lot longer than most anticipated. The Centro (though a bottom-end product) gave them some life. I also disagree that this is the only trick up their sleeve. I know all eyes are on the Pre right now but Palm is rarely a "one trick pony."
When they saw the demise of the PalmOS, they added WinMo. Many saw that as a lack of confidence in their OS. However, Palm saw it as an untapped market. Palm has been quick to offer versions on most wireless technologies. However, Sprint seems to be the only hiccup in the plan. But I am not so certain that going with Sprint out the door was such a bad idea as many have claimed.
Few people will move over to Sprint to get the Pre. However, as we have seen a GSM version is not far behind. Palm will probably use the short window of the Sprint launch to gauge market response and refine the platform. Afterwords, they can push out to GSM and CDMA carriers with better confidence of performance.
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|I must admit I've got a dog in that hunt, sort of; for geographical reasons I have to maintain my voice service on Sprint, and I am extraordinarily dissatisfied with my current Sprint handset. (Keep an eye on YouTube after the Pre launch for a video of me, my current phone [rhymes with Hackhairy Hurl], and a .45. So much hate.)
That said, if Palm was going to choose any nationwide provider who's frankly as hungry for a hit (and therefore likely to commit to a successful launch) as they are, I believe Sprint's the correct choice. What, they should navigate Verizon while those guys are in the midst of the Alltel acquisition and all that entails? I was a bit surprised that they'd go CDMA before GSM, but I think you're dead right with the idea that the first wave of phones may double as something of a shakedown cruise. In that case, Sprint's the company that would benefit most from smooth, smooth sailing on the provider side of things.
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|Palm is going down.
Why would anyone invest or even buy the PRE when the company can belly up any time and leave them hanging?
Palm is famous for leaving their customers hanging.
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