Palm Reports Earnings for Q1 FY 2010

Palm today reported earnings for Q1 FY 2010. The company shipped a total of 823,000 smartphone units during the quarter, but it’s still unclear how many Palm Pre phones were shipped. Palm has scheduled a call with investors for 4:30 PM EST, so we might get more insight how many Palm Pre phones have been sold since the June launch.

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We’re making significant progress with Palm’s transformation, and our culture of innovation is stronger than ever. We’re launching more great Palm webOS products with more carriers, and turning our sights toward growth,” said Jon Rubinstein, chairman and chief executive officer.

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Palm Reports Fiscal Results, Insight Into Future Products

Palm today reported a third-quarter net loss of $31.5 million, or 30 cents a share. Palm Centro smartphone sell-through reached a company high, totalling 833,000 units. "Centro is off to the strongest start of any smartphone in Palm’s history," said Ed Colligan, Palm president and chief executive officer. Palm executives offered insight into future Treos and the upcoming OS. "Those products aren’t coming out this quarter," said Colligan when asked about the release of new Treo smartphones during the upcoming fiscal quarter. Colligan did reaffirm that the company is on track to deliver their next generation operating system by the end of the calendar year.

The company expects the "first half fiscal 09 to be a turning point in the business". The company plans to continue to expand Centro distribution globally, expecting Centro growth to help offset declining growth in Treos. When asked about the Centro in the US, Colligan acknowledged "opportunities" exist with other carriers. With the new operating system will bring new Treo devices. While Palm typically does not comment about new devices, company executives are "excited about designs on the table." New Windows Mobile Treo products targeted to higher end enterprise business are expected this year. While the new operating system might be completed by the end of 2008, it wasn’t clear if products running the new OS would be available, with the possibility of new Treo devices not hitting shelves until 2009.

Earnings Details

Net loss applicable to common shareholders for the quarter was $31.5 million, or $(0.30) per diluted share. Net loss included stock-based compensation expense of $6.2 million, amortization of intangible assets of $1.0 million, restructuring charges of $12.3 million and accretion of series B convertible preferred stock of $2.4 million. This compares to net income for the third quarter of fiscal year 2007 of $11.8 million, or $0.11 per diluted share.

Net loss applicable to common shareholders in the third fiscal quarter, measured on a non-GAAP(1) basis, totaled $17.0 million, or $(0.16) per diluted share, excluding stock-based compensation expense, amortization of intangible assets, restructuring charges and accretion of series B convertible preferred stock and adjusting the related income tax provision to 26 percent. This compares to non-GAAP net income in the third quarter of fiscal year 2007 of $16.5 million, or $0.16 per diluted share, which excluded the effects of stock-based compensation, amortization of intangible assets, an in-process research and development charge and adjusting the income tax provision to 40 percent.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, totaled negative $28.4 million. EBITDA, adjusted to add back stock-based compensation, other non-operating expense and restructuring charges, or Adjusted EBITDA, totaled negative $9.5 million.

Palm Reports Financial Results

Palm shares took a hit on Wednesday after the company reported disappointing financial results on Tuesday coupled with a disappointing
forecast for the current quarter. Highlights for the quarter included the introduction of the Palm Centro, the expanded international release of the Treo 500v and completion of the recapitalization deal with Elevation Partners.

Total revenue in the second quarter of fiscal year 2008, ended Nov. 30, was $349.6 million. Palm had generated $392.91 million in revenue the year prior. Despite the decrease in total revenue, smartphone sell-through for the quarter was 686,000 units, up 11 percent year over year. Smartphone revenue was $282.4 million. Palm had expected to ship the Verizon Palm Treo 755p, but certification issues delayed the release and certainly impacted Palm’s quarterly numbers. "There’s definitely lost business when you fail to ship during the holiday season," said Palm’s CEO Ed Colligan. "We have to build a broader array of products so one miss does not have such a big effect."

Palm is currently undergoing a restructuring program as part of a recapitalization deal with Elevation Partners. Former Apple Inc. executive Jon Rubinstein has joined Palm as executive chairman as part of the restructuring. Rubenstein played a key role in the development of products such as the Apple iPod and iMac computers. Rubenstein is expected to play a vital role in positioning Palm to "lead the next phase of the smartphone and mobile-computing markets."

The Centro has been a success in many ways, but Palm warned of a "tight component supply" for the device because of unspecified issues at one supplier. Priced at just $99, Palm also noted that some canibalization has occured of the higher priced Treo smartphone specific to Sprint’s network. "We saw some cannibalization, but we had expected that," said Colligan. "We are pleased with the early success of the Palm Centro and intend to deliver more Windows Mobile and Palm-based products throughout the next year."

The Treo 755p represents the end of the current generation of Palm smartphones, but Palm’s management certainly appears to have a clear grasp of what’s needed to get the company back on track. During the conference call, Colligan made it clear that Palm’s focus is on developing "breakthrough devices" and "revolutionary designs".

Palm Posts Q1 Loss

Palm announced earnings today, posting a quarterly loss for Q1. The loss was a result of intensified competition
in the mobile smartphone market from Apple’s iPhone and others.

Total revenue in the first quarter of fiscal year 2008, ended Aug. 31, was $360.8 million. Smartphone sell-through for the quarter was 689,000 units, up 21 percent year over year. Smartphone revenue was $302.2 million, up 12 percent from the year-ago period.

Palm, in its first financial report since it sold a 25 percent stake of the company to private equity firm Elevation Partners, posted a fiscal first quarter net loss of $841,000, or 1 cent per share, from a profit of $16.5 million, or 16 cents per share, in the year-ago period.

"The launch of our Palm Treo 500v with Vodafone and the Palm Centro with Sprint in September demonstrate our commitment to delivering competitive, high-quality solutions and expanding our reach to a broader market and range of customers," said Ed Colligan, Palm president and chief executive officer. "As we move toward completing the recapitalization transaction with Elevation Partners, we are excited to strengthen our ability to accelerate Palm’s growth in the future."