Palm is Doomed (Redux)
February 23rd, 2010, 5:09pm by Jake
So the fortunes of Kelvin and I have taken a turn for the worse the past few months, especially the past few weeks. The big “news” is that analysts are reporting that sales are slow at Verizon and store employees have been recommending Droids over the Pre. These concerns have caused shares to fall, and the momentum seems to be self-sustaining… it’s almost as if these analysts are making recommendations and setting targets as they chase the stock price up or down! Nevertheless, this is either an epic buying opportunity or the end of any early retirement plans I may have dreamed of.
Now, since the quarter ends on Friday, we should expect Palm to warn about a revenue miss on Monday or Tuesday of next week. Monday would be appropriate, as it’s the 10-year anniversary of both Palm’s debut as an independent company and Palm’s high-water mark in share price. In for a penny, in for a pound at this point. Normally, I wouldn’t be worried, but the mainstream “me-too” media smells blood in the water and are really pushing the Palm-is-doomed storyline, which could very well hurt sales. Palm will set their story straight on March 18 or sooner. Any guesstimates about how Palm will do?
February 24th, 2010 at 4:10 pm
Well, clearly, our evangelism isn’t enough (not surprising, it didn’t help TiVo either). Honestly, I was blaming the slow take up on Sprint up until now, but if the products aren’t selling now, with VZ distribution, ads all over the place, decent apps, then you just have to blame the products. Palm has all their ducks in a row, so there should be no excuses. Maybe it’s just not what people want.
February 25th, 2010 at 11:50 am
I think Palm came in just under my most pessimistic scenario, and just about in line with Kelvin’s best guess. 🙂 If history is any guide, revenue will be at the upper end of the new range, say $318 million, with ASP about $365, meaning ~850,000 phones shipped. Sell-through is probably hurt as well, if it’s less than 600,000 Palm is back on deathwatch.
February 25th, 2010 at 9:33 pm
Here’s the email Jon Runebstein sent to all employees.
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Team,
This morning we announced preliminary results for our 2010 third quarter. Since the quarter has not yet closed, it is too soon to offer exact numbers, but we stated that we expect to report revenues for Q3 between $300 and $320 million. We also announced that we expect our revenue for this fiscal year to fall below the guidance we gave to Wall Street, which ranged from $1.6 to $1.8 billion. As we mentioned in our press release, our softer than expected performance is due to slower than expected customer adoption of our products, which in turn has prompted our U.S. carrier partners to put additional orders on hold for the time being. On a positive note, we expect to exit the quarter with over $500 million in cash on our balance sheet. We’re scheduled to announce our full financial results in March.
I realize this news is difficult to swallow. We made this announcement today to prevent a surprise for Wall Street when we announce quarterly earnings in March. In the meantime, the entire executive team has been working extremely hard to improve product performance, and have implemented a number of initiatives to increase awareness and drive sales.
Dave Whalen and I just returned from a very successful meeting with Verizon Wireless, where they acknowledged that their execution of our launch was below expectations and recommitted to working with us to improve sales. To accelerate sales, we initiated Project JumpStart nearly three weeks ago. Since then, nearly two hundred Palm Brand Ambassadors, supplemented by Palm employees from Sunnyvale, have been training Verizon sales reps across the U.S. on our products. Early results from the stores have already shown improvement on product knowledge and sales week over week. You may have also seen a growing number of Palm ads on billboards, bus shelters, buses, and subway stations—all getting the word out about Palm.
All of these efforts are examples of how we are working to accelerate adoption and grow distribution of webOS. In the next few weeks, your management will work with you to make sure your priorities are laser-focused, primarily on helping to increase sales, improve product quality and differentiate the Palm product experience.
Our goals are taking longer than expected to achieve, but I am still confident that our talented team has what it takes to get the job done.
We’ll schedule an all-hands meeting after our earnings announcement in March, and I’ll be happy to answer your questions.
Go team!!!
jon