Palm revenues plunge as Pre's launch draws near

Palm sales plunged 42% over the past year.

Palm reported a continued steep decline in its smartphone revenues for the quarter ending Feb. 27, as it nears the launch of the anticipated Palm Pre with Sprint.

The company's net loss for the third quarter, applicable to common shareholders, was US$98 million, compared to $57 million for the same period in fiscal 2008. The non-GAAP net loss was just under $95 million compared to $17 million a year ago.

Through its partners, Palm sold 482,000, a plunge of 42% year over year.

Without giving specific guidance, executives said Q4 will be equally challenging.

The company's future is widely seen to hinge on how well the Pre sells. The smartphone sparked a lot of excitement when it was unveiled in January at the Consumer Electronics Show.

Palm recently announced the closing of a public offering of common stock, of about 26.6 million shares, and the associated exercise of its underwriters' over-allotment option. The estimated net proceeds to Palm are $103.6 million.

In the quarterly earnings call Thursday, company executives said the transition from Palm's existing product line to the new Palm Pre with its innovative webOS, coupled with the economy's contraction, pose a major challenge. However, they also insisted that they are on schedule to deliver the Pre with Sprint in the next 15 weeks.

The company has been focusing on optimizing its manufacturing and supply chain relationships, and its support programs with Sprint to make sure they can meet an expected high demand for the Pre. Another priority is making sure that Sprint's certification of the Pre for its network goes smoothly.

The other areas of focus have been forging relationships with and supporting developers, both existing PalmOS programmers and new ones attracted to Palm's webOS architecture. Palm has recently begun releasing more details about the operating system, and an early version of its Mojo software development kit is in a limited release. Executives declined to go into details about the online applications store that will host programs for the Pre.

"We're meeting or exceeding our strategic goals," said Ed Colligan, Palm president and CEO.

He said there is strong interest from world-class European mobile carriers in the Pre, but the company's priority is the launch with Sprint.

Despite the decline in revenues, the recent capital infusion gives Palm all the cash it needs to successfully launch the Pre.

Executives reiterated that the Pre is the first webOS product, and that the company plans to release a roadmap for other products, after the launch.

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John Cox

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