Well ahead of their scheduled March 19th quarterly conference call, Palm has just posted preliminary results for their 3rd Quarter of Fiscal Year 2009. The numbers are grim enough and the posting early enough that one assumes that Palm is doing their best to separate the bad news from whenever the Palm Pre will launch (still on track for the 1st half of the year, according to the release).
Revenue for the quarter is expected to be between $85 and $90 million, just a bit less than their cash burn for the quarter of close to $100 million, with somewhere in the neighborhood of $220 million cash-on-hand by the end of the quarter. In other words, things are awfully tight.
So tight, in fact, that Palm "intends to strengthen its working capital position" -- which is to say they're looking at ways to bring in some cash in a time when the economy makes that awfully difficult. They may "remarket[...] a portion of the common shares underlying the Series C preferred stock." Your guess as to what exactly that means is likely better than mine (full release is after the break).
Finally, if you were hoping for a gigantic revenue bump at the launch of the Palm Pre, think again. Since Palm intends on offering free feature updates to the webOS, they will need to account for the income the Pre generates over a 2 year cycle (similar to how Apple accounts for the iPhone) instead of at the moment of sale. They'll have more at http://investor.palm.com.
In short, Palm's March 19th call is going to be very interesting indeed. Palm is stating very strongly that they're not going to run out of cash and one assumes that an acquisition is still most definitely off the table, but these numbers are as grim as I've ever seen from Palm. They're spending about the same amount that they're taking in in revenue right now and while I'm no investor, analyst, or CFO-type, that doesn't sound good to me.
Full release after the break.
SUNNYVALE, Calif., Mar 03, 2009 (BUSINESS WIRE) -- Palm, Inc. (Nasdaq:PALM) today reported preliminary results for its third quarter of fiscal year 2009, which ended Feb. 27, 2009.
The company announced that it expects to report revenues for the third quarter of fiscal year 2009 in the range of $85 million to $90 million. The revenue declines vs. the company's second quarter of fiscal year 2009 and third quarter of fiscal year 2008 are the result of reduced demand for Palm's maturing legacy smartphone products, the challenging economic environment and later-than-expected shipments of the Treo(TM) Pro in the United States. The company expects declining revenues and continued margin pressure from its legacy product lines in the fiscal fourth quarter.
"The much-anticipated launch of the Palm(R) Pre(TM) 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(TM) reaffirms our confidence in our long-term prospects and our ability to reestablish Palm as the leading innovator in the growing smartphone market."
Palm stated that cash used in operations for the quarter is expected to be between $95 million and $100 million. The company's cash, cash equivalents and short-term investments balance is expected to be between $215 million and $220 million at the end of the third quarter.
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.
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. A more detailed discussion of this accounting treatment can be found on Palm's Investor Relations website at http://investor.palm.com.
Palm Investors' Note
Palm will report its complete third-quarter fiscal year 2009 financial results on Thursday, March 19, 2009, and will host a conference call to review the complete financial results beginning at 1:30 p.m. PT / 4:30 p.m. ET. The conference call will be hosted by Ed Colligan, president and chief executive officer. Investors and other interested parties are encouraged to listen to the call by logging onto the conference call webcast prior to the start of the conference call at Palm's Investor Relations website (http://investor.palm.com). Investors wishing to listen to the conference call via telephone may dial 800.901.5247 (domestic) or 617.786.4501 (international). There is no pass code required for the live call. A telephone replay of the conference call will be available through March 30, 2009. The dial-in number for the replay will be 888.286.8010 (domestic) and 617.801.6888 (international). The pass code 15222468 is required for the replay. An archive of the audio webcast and visual portion of the conference call will be posted on Palm's Investor Relations website at http://investor.palm.com.
Comments
It's funny how investors and analysts think. You tell them you have no money in the bank, but you have products in the pipeline with a gigantic upside and they lavish praise upon your stock.
Palm should be OK in the short term and everything from here on out is potential upside as webOS phones begin hitting the market.
Just think back how Apple was once considered dead in the water back in the 90s, as its stock languished and its products were crap.
>Palm should be OK in the short term
THAT's been their biggest problem throughout these many years.
(Not much different from the rest of corporate America. Short term gain is like living on cocaine, eventually your long term health is destroyed).
lol I just sent a tip about this (read about it on ZDNet) and posted a thread while this was being put up.
Hopefully they don't run out of cash before the Pre launches.
Heres the thing, analyst had predicted $155 million for the the quarter, however, obviously no one thought about the huge anticipation of the Pre and how it could potentially hurt Treo sales. This is indeed what is happening, customers who would have traditionally bought a Treo are holding out for the Pre. In the interim, this is really hurting Palm, on the other end it is GREAT news for Palm and Sprint. If that many customers are holding out, then I believe the analysis prediction of 1.5 million Pre's being sold (on Sprint) within the 1st 12 months is pretty conservative. Especially when you factor in that Sprint, ATT and Verizon carry Treos. I won't even get into worldwide, that is a different animal.
Take a look at this article: http://www.informationweek.com/news/personal_tech/smartphones/showArticl...
I am sure that is the spin, but you would have to be living in a cave to think it true.
Palm's failure to sell through existing handsets were not due to Pre, but due to problems Palm made in the last bunch of Palm handset releases. The 800w couldn't sell before anyone heard of the Pre, its refresh, the Treo Pro, could not even get a carrier before anyone expected the Pre. Bad testing by Palm and Sprint, both now with their development and support groups stripped out in layoffs, caused problems with the Treo Pro in CDMA.
Those customers mostly left Sprint or bought different handsets.
What a bunch of speculative BS, the lack of sales are not specific to one carrier. Do you have any proof the announcement of the Pre hasn't hurt Palms current products? Most analyst seem to think so. Palm sales are down worldwide. It is not only Palm that has suffered from slumping sales, Rim had a slower than expected 3rdQ as well, in fact, this past January Rims sales dipped 17%. Is it the economy, is it the Pre?... Who knows! I have a client who was going to upgrade their 40+ Blackberry's with the BB Bold or the Storm, when they heard about the Pre they decided to wait. Even iphone sales have dipped significantly.
You are completely incorrect and dodging the quesiton
Well, speaking from a customer and developer's standpoint, I was very encouraged to hear that Palm plans on adding features to the WebOS as software updates over the life of the Pre. Too often do companies only think about the initial sale and leave it at that. I believe this is what really helped the iPhone and I think it will help Palm and the Pre as well.
I know I will be holding out for the Pre and if I had the money, I'd invest in Palm!
What you are referring to is required buy a company attempting to sell a new operating system to carriers. What kind of development do you do? Increment OS and software updates are free, upgrades which are different, are not.
What you can read into that is that WebOS will be released semi-incomplete or without several tie-in programs expected or promised, and as they bring them in they will internally cost them to future earnings over two years, instead of one.
Obviously that is how YOU read into things, why would Palm... 1) Release webOS "semi-incomplete"? That's an oxymoron. 2) Why would Palm need to supplement updates for webOS? That is, what you're implying. Palm is specifically referring to 3rd party app's (products) designed for webOS.
I have a great idea on how to raise capitol. Announce the release date for the pre and get some more interest for it!?!
How to raise money? Easy!
1.) 3/03: release super-bad earnings estimates and send PPS to hell;
2.) start slowly buying between $6-7;
3.) 3/15: announce Pre release date(s);
4.) sell shares for $11-13;
Step 5.) PROFIT!!
There next product should be some kind of netbook based on webOS. That may help will the below line as compared to waiting for the next phone.
The Treo Pro has clearly not helped Palm's bottom line. Its not available on Sprint yet, won't be available on Verizon anytime soon and is only available on GSM carriers if you buy it independently as an unlocked device. It is unsuprising that sales would be disappointing, there are plenty of other WM devices available.
When Palm announced the Pre, it also announced the end of PalmOS which is going to kill sales of those devices.
Palm needs to get the Pre out soon to avoid the fate of Osborne.
...or Palm....
Well, I think there are at least two movies deserving this title. These are Terminator 4 and Transformers 2. What do you think?
P.S. To moderators: sorry for possible writing to a wrong category but I didn't find any other category for general chat.
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