Delay, repairs, even success hit Palm's profit

Palm expects a product delay, warranty repairs and lower prices to hurt its quarterly results.

Struggling smartphone maker Palm can't win for losing.

The company's shares plunged Friday after it forecast a revenue shortfall and a loss for its fiscal second quarter ended November 30. Even the success of its newly introduced Centro hurt its financial results, Palm said in a news release.

Palm shares (PALM) on the Nasdaq were down US$0.81 (AU$0.92) at US$5.78 on Friday afternoon. As recently as October, they were trading at more than US$15.

The Centro, smaller and less expensive than Palm's flagship Treo line of smartphones, shipped in higher than expected numbers in its first quarter on the market, Palm said. But because of its low price -- it's currently offered by Sprint Nextel for US$99 with a two-year contract -- those big shipments contributed to a lower-than-expected gross margin.

However, the biggest black eye in the preliminary financial report was a delay in shipping an unidentified future product that was expected to be certified within the quarter, Palm said. It's just the latest product setback for the company, which is making the transition from PDAs (personal digital assistants) to phones and fighting far bigger competitors including Research in Motion, Motorola and Apple. In September, it canceled the Foleo, a much-hyped accessory for the Treo, just days after offering assurances it was still coming.

An unforeseen increase in warranty repair expenses also hurt Palm's margin, the company said.

Based on its preliminary numbers, the company expects US$345 million to US$350 million in revenue for the quarter, down from the US$370 million to US$380 million it predicted when it reported results for its previous quarter on October 1. It also expects a loss of US$0.22 to US$0.24, compared with a loss between US$0.01 and US$0.03 forecast earlier. Full results will be announced December 18.

It's not uncommon for a new handset to fail carrier certification, even if it doesn't have major technical flaws, but Palm has deeper problems than most device vendors, according to Avi Greengart of Current Analysis. The bulky Treo platform is aging and even Palm's vaunted developer support is in doubt as OSes such as Windows Mobile and Symbian build up big installed bases, he said.

There are still applications for Palm OS that you can't get on any other mobile platform, but the company's blunders and delays of its promised Linux-based OS are taking their toll, he said. By the time the Linux platform hits the market, late next year or after, it will be up against systems based on Google's Android, he pointed out.

"The PalmOS developer community is considering its options," Greengart said. "The future Palm Linux OS is not a slam dunk."

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Stephen Lawson

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Luke Hill


I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?