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Comments on: Palm to Create Subsidiary for OS Business

Palm, Inc. has announced it will form a wholly owned subsidiary out of its Platform Solutions Group, which oversees the Palm OS and its licencing. This isn't exactly the same as splitting off the OS portion of the company from the hardware part, but it's close. The new subsidiary will still use Palm's buildings and some administrative staff.

A committee of the board of directors of Palm, chaired by David C. Nagel, will oversee the subsidiary's creation by the end of this year.

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Poll Relationship and Palm

EGarrido @ 7/27/2001 5:04:45 PM #
Well, as from the poll, it looks like half of us are happy and half of us are not. Interesting move by Palm. Hopefully it's a good move.

Eric Garrido
i voted not to split
I.M. Anonymous @ 7/27/2001 5:19:08 PM #
i voted not to splt in 1/2, but i am VERY happy wth this. The problem wth flat out spltting is that the OS side would probably go under, resulting in a crumbling of the entre palm economy. until it is possible to do a full split, i didn't wanna see them die bacause i love my palm os pda. A subsidary, however, i didnt object to since there really isnt much of a risk associated with it.

spritting?

I.M. Anonymous @ 7/27/2001 5:17:13 PM #
Palm's CEO said a few months ago that the company was considering spritting the OS portion of the company off.

how do you sprit a company, ed?

RE: spritting?
Ed @ 7/27/2001 5:28:18 PM #
It's a delicate financial operation that requires a room full of lawyers, three accountants, two rubber bands and a koala bear. Cook in a 350 degree oven for seven weeks and then garnish with nuts, bolts, and washers then serve.

---
News Editor
Palm Infocenter
RE: spritting?
I.M. Anonymous @ 7/27/2001 5:53:17 PM #
what do you do with the poor koala bear?

RE: spritting?
I.M. Anonymous @ 7/28/2001 3:06:24 PM #
Eat when tender.

RE: spritting?
Raishe_werk @ 7/30/2001 5:00:07 PM #
you feed the bear to the lawers, when the begals and latte' run out

-Raishe
"Monster Pig kills Jesus
More at 11"

This may lead to a full break

jayhawk88 @ 7/27/2001 6:10:16 PM #
Right now, this is being spinned as a "subsidiary", but as a pundit quoted in a ZDNet article about this:

"Why would you create a subsidiary if you aren't planning to spin the business off?"

Indeed. I'm sure you could probably come up with some sound financial reasons to do something like this, but I'd say the writings on the wall. Probably Palm hopes continuing m50x and possibly m700 sales will give both divisions some strong quarters coming up, then complete the spin-off at that point.

RE: This may lead to a full break
Cheetah @ 7/27/2001 7:58:36 PM #
There are a couple of reasons to do this including:

1. as you stated, as a pre-cursor to spinning off completely

2. organizationally the company will operate very differently (e.g. a President for the subsidiary will make most decisions, needing approval for only the most important ones

3. financially, the two companies would have stand-alone financials plus the parent would have a consolidated financial (that would be the only publicly released financials). This way they can truely judge their financial success.

RE: This may lead to a full break
I.M. Anonymous @ 7/27/2001 10:51:56 PM #
Palm is tiny company, only about 900 people. It doesn't make sense in term of corporate cost to set up another "subsidiary" to increase efficiency when the concept of "palm product" is OS+hardware and the old arrangement works pretty good.

so something is definitely up. And knowing Palm, usually they are pretty predictable. Most of the exect are unimaginative B-school type. Somebody, quick open a management textbook....

RE: This may lead to a full break
I.M. Anonymous @ 7/28/2001 1:07:10 AM #
There was some idle talk about sony buying palm. The original guy (what's his name? hawkins?) had a good idea, but in order to see the product produced he had to sell his company (to us robotics). Then 3com buys us robotics. Meanwhile hawkins leaves to form handspring, and 3com spins off palm.

Now say palm spins off the OS, it runs into trouble, then gets snatched up by sony. Where does that leave palm hardware? They loose control of the direction of the OS, their products are increasingly less innovative than the clones. Say palm hardware goes out of business? Then you'd have a 'palm-economy' without palms, just like you have a 'PC-eoconomy' without original IBM-PC's. Microsoft/Intel basically rules the PC standard.

What would make sense is for palm to sell the OS subsidiary to handspring so the original guy (hawkins?) could continue his vision.

RE: This may lead to a full break
I.M. Anonymous @ 7/28/2001 9:46:20 AM #
Sony is not going to buy Palm. If anybody buys Palm it will be IBM. IBM already has a good working relationship with Palm. Palm manufactures the IBM WorkPad line for them, and IBM hates Microsoft's guts due to past business relationships with them, i.e. OS/2.

IBM has virtually unlimited funds for Research & Development, has strong ties to the corporate community, and would instantly give credibility for the Palm OS platform for business use for those few companies that still have not decided on a PDA Platform.



RE: This may lead to a full break
I.M. Anonymous @ 7/28/2001 12:23:52 PM #
That is a good point. IBM has an excellent R&D team, and they already have a great relationship. This should be interesting.

RE: This may lead to a full break
I.M. Anonymous @ 7/28/2001 3:25:53 PM #
why would IBM buy PALM?

they can just cobble together an ARM PDA and install embedded Linux, and be done with it. It's cheaper and more profitable that way, not to mention it's good karma.

RE: This may lead to a full break
I.M. Anonymous @ 7/29/2001 3:42:41 AM #
Because PalmOS already has a huge following, which you would automatically pickup. As opposed to setting up a competing system in which you have to convince both WinCE users and PalmOS users to switch. That and they'd have to kill off their own Workpad series.

RE: This may lead to a full break
I.M. Anonymous @ 7/29/2001 10:36:49 AM #
does huge following prevent another gadget to suddenly sell more in term of dolar value? apparantly not. And Linux PDA hardware is backed by Sharp. Yes that would be from a company that has sell more PDA than Palm Inc. in Japan. What's more IBM already has a huge Linux research group, and all sources are open. Why bother buying a cpmpany with poison pill built into the stock when for chump change IBM can make hardware and integrate it immediately to their system? At least for the corporate market. Nobody is chalanging Palm's Inc reign in sub $90 bucks PDA. If you think Win CE is nasty for Palm, wait until Sharp with their proven hardware to come in.

RE: This may lead to a full break
Raishe_werk @ 7/30/2001 5:03:38 PM #
i knew a linux geek would have their $.02. hasn't he read the posts about running commands in graf? i don't like to start flames, but that idea, it must have been the penguin talking or a Linus mole. i have mad respect for the Linux community, but sometimes they take their religion too far. i don't see any logic in killing off the 100,000+ developers in the name of some bird. they should focus their attack at the moment on the PC os market instead of making bird like comments in the pda world. big up to you guys, but relax here.

-Raishe
"Monster Pig kills Jesus
More at 11"

Need cash will sell asset

I.M. Anonymous @ 7/27/2001 10:47:14 PM #
whoa Palm is definitely getting desperate. Do I sense they are pulling a "Lucent" here? (ie. splitting and cloning itself like crazy than self that part.)

or is this going to be just like "Psion"?

But I'll put my bet on the Lucent style money raising trick.

aha !

I.M. Anonymous @ 7/27/2001 11:08:39 PM #
You people just don't understand. It's Palm economy at work!

Why isn't the OS profitable?

I.M. Anonymous @ 7/28/2001 12:47:30 AM #
Wall Street doesn't approve of the continued selling of items at a loss in the name of growth. It doesn't matter how many billions of widgets you sell. If you're still loosing money on each sale, your debt is increasing, and thus access to capital diminishing.

Palms have been around for a number of years now. There's no reason why their current R&D shouldn't be paid for via the licensees and hardware customers. If I was Palm CEO, I'd raise the $8 I get for each palm sold (for the OS) to $25. If some of the clones drop out or switch to PocketPC, oh well.. Being in business is about making money, not loosing it.

RE: Why isn't the OS profitable?
EGarrido @ 7/28/2001 2:01:24 AM #
Companies wouldn't necessarily drop the Palm OS if there was a raise in price per unit of the OS, they'd simply pass the extra cost to the consumer. That way, profit from each device would remain the same for them. Poor business practice from the consumer standpoint, but it would have to be done.

Eric Garrido
RE: Why isn't the OS profitable? - here's why
Cheetah @ 7/28/2001 1:21:59 PM #
Making money is not just about selling a unit for more then the cost of making a unit.

- You have to manage inventory (or it will lead to big writeoffs),
- collections (you can sell to alot of customers (remember Palm doesn't sell directly except from their website which I'm sure is a small part of their total sales)but you have to collect from them also. With alot of eCommerce sites going under there could be alot of losses from not being able to collect some or all of their receivables.
- There are alot of fixed costs that a company needs to recover to be profitable. For example building costs. Even if you sell a Palm for $400 with a manufacturering cost of $200 you still might not make money because the unit sales might not make enough "gross profit" (selling price - mfg cost) to pay for these building and other fixed costs.
- lawsuits (takes management time and legal costs)
- etc. etc.

Famous words

I.M. Anonymous @ 7/28/2001 3:56:05 AM #

"Houston! We have a problem"

Good Corporate Politics

Dr. Bob @ 7/28/2001 10:57:16 AM #
I'm surprised to read that some people are taking this as a sign of weakness in Palm Inc. This is a move that the company has been contemplating for years and has nothing to do with their recent financial problems. The decision to create an OS subsidiary has more to do with corporate politics than corporate profits.

I can understand Handspring, HandEra, and the rest being unhappy that the company that makes their operating system also competes against them. While "co-opetition" may have been one of the buzz words of the 90s, it makes for an uneasy partnership. This unusual relationship makes it difficult for Palm to defend itself against charges that the OS developers give preferential treatment to Palm's hardware division. Dividing the company will held reduce accusations of corporate nepotism.

If anything, the recent downturn in the handheld market has slowed this process, rather than hastened it. If all Palm-based handhelds were selling at a greater rate then the OS licencing business would be more profitable and could be viable as a separate company at an earlier date.

RE: Good Corporate Politics
I.M. Anonymous @ 7/28/2001 12:27:00 PM #
for years? but none of them has even been around for more than 3-4 yrs. And why would Palm Inc appease licensee with making good politic right now? at the very time when politically it is in their advantage to kill everybody and come out ahead.

RE: Good Corporate Politics
Ed @ 7/28/2001 1:12:32 PM #
If Palm wanted to drive Handspring and HandEra out of business, they could do it in a heartbeat; simply withdraw their access to the OS. The fact that Palm licenses the OS at all should be an indication that Palm wants its competitors to succeed.

You can read my full opinion about Palm's relationship with its licensees in this editorial I wrote a few months ago:
www.palminfocenter.com/view_story.asp?ID=1706

You also might also be interested in Michael Mace's thoughts on this:
www.palminfocenter.com/view_Story.asp?ID=1706&MODE=FLAT#8020
(I can confirm that this really is Michael Mace, not someone using his name.)

---
News Editor
Palm Infocenter

RE: Good Corporate Politics
Cheetah @ 7/28/2001 1:28:01 PM #
Good point Ed.

I also don't see this as a sign of weakness. It is well known that Strategic partners don't want to compete with yet rely on the same company. This gives Palm an unfair advantage in their eyes.

This has been a complaint against M$ for years now (and Apple when they tried licensing their OS). If you don't believe me, ask the Feds who wanted to breakup M$ for this very reason.

Palm is just being more "fair" to it's strategic partners and allowing the OS subsidiary to "prove" itself by becoming profitable. The only way the OS company can do this is to service ALL their customers (e.g. Sony, HandEra, HandSpring, IBM, Palm) equally. For example, I would hope that all companies will have equal support of Palm Desktop and Palm OS AT THE SAME TIME.

Good move Palm.

RE: Good Corporate Politics
I.M. Anonymous @ 7/28/2001 2:59:41 PM #
not against Handspring they can't. Handspring has Palm by their ball. When Hawking/Dubinsky bailed out they have some sort of agreement regarding palm OS ownership.

Plus, if you remember the last rumor about Handspring jumping ship, than a month later they sign contract for "undisclosed" amount. (wonder, wonder) than we know Palm was trying to jerk HS but they couldn't pull it off. Afterall, their share of sale was eaten alive by Handspring at exponential rate at that time.

from all licensee, (HS/SNE/handEra) Palm can only jerk around HandEra.



RE: Good Corporate Politics
I.M. Anonymous @ 7/28/2001 3:12:28 PM #
Palm has nothing whatsoever to dictate the Palm technology direction except their happen chance of owning the original Palm OS, which than is connected with market share.

but really, everybody else has better hardware, and from HS/HandEra/Sony we know that they are reasonably competent to write important extension.

Palm isn't that far ahead in OS know-how curve to be able to say they have significant advantage on the next gen OS.

remember the 4.0 is a basket case, this isn't even worth arguing. What you see is what you get, in term of strategy. But OS 5.0 is different story. It is make or brake time for Palm-kind. 5.0 will determine if Palm will be a viable future PDA or become another curious computing hisotry footnote.

Ed, you're wrong about Palm's ability to control the OS
I.M. Anonymous @ 7/28/2001 5:02:42 PM #
You said "If Palm wanted to drive Handspring and HandEra out of business, they could do it in a heartbeat; simply withdraw their access to the OS."

This is dead wrong. Palm is legally bound by their license agreements to supply the OS to Handspring, Sony, IBM (who just sells rebadged versions of Palm's PDAs), Symbol, HandEra, Acer and a number of other hardware manufacturers.

Sony's license was announced in November, 1999. In April, 2001, Handspring extended its license to use the Palm OS through April, 2009, while in May, Symbol extended its license of the Palm OS through April 2005. Acer signed up in June, 2001. Perhaps you could do a bit of research and let us know when the other agreements expire. It's probably safe to assume that the other licenses all last at least 4 or 5 years.

As you are aware, Palm licenses the OS for less than $10 per PDA sold - not enough to make the company any significant profits and this is why they are so dependent on hardware sales. Given the fact that they are locked into long term OS contracts, don't expect this arrangement to change any time soon.

Also remember that the two most significant additions to the OS were supplied by its licensees/competitors, namely 16 bit color (Handspring) and VFS (Sony). The third significant innovation - AutoCard (HandEra) - is not truly part of an OS, but Palm should have rushed to license this technology for their PDAs. Palm thought they could be clever and sit back and have their licensees do all the OS innovation for them and simply cherry pick whatever they want and then roll it into the new Palm OS. Too bad they didn't bother spending the money they saved on OS development on trying to improve their hardware!

Ironically, Palm itself receltly said,

"IF WE FAIL TO EFFECTIVELY RESPOND TO COMPETITION FROM PRODUCTS INTRODUCED BY LICENSEES OF OUR PALM PLATFORM OR IF OUR LICENSEES FAIL TO SELL PRODUCTS BASED ON THE PALM PLATFORM, OUR RESULTS OF OPERATIONS MAY SUFFER AS THE REVENUES WE RECEIVE FROM LICENSE FEES MAY NOT COMPENSATE FOR THE LOSS OF REVENUES FROM OUR DEVICE PRODUCTS.

The success of our business depends on both the sale of handheld device products and the licensing of our Palm platform. However, licensees of our Palm platform offer products that compete directly or indirectly with our handheld computing devices. For example, licensees such as Handspring and Sony use our Palm platform in products that can compete with our handheld devices. In addition, our Palm platform has been licensed by other manufacturers such as Nokia and Kyocera for use in devices such as mobile phones or other similar products that can compete indirectly with our handheld devices. If revenues from our handheld devices suffer because of competition from licensees of our Palm platform, our results of operations would suffer and our ability to implement our business model would be seriously challenged. In addition, our licensees may not be successful in selling products based on the Palm platform, which could harm our business and results of operations."


http://biz.yahoo.com/e/010411/palm.html


RE: Good Corporate Politics
I.M. Anonymous @ 7/28/2001 6:07:55 PM #
I haven't read Palm's licensing contract (and I'll bet you haven't either) but I'd also bet Palm has a clause that allows them to get out of it if they want. They'd probably have to pay the licensees some cash but they could get out.

Remember when Apple used to license its OS? Then one day they stopped. Just made an announcement and it was over. Palm could probably do that, too.

Don't forget, this is America. Companies are only bound by what can be proved in court. If Palm withdrew Handspring's contract, they could keep them tied up in court until Handspring was dead. Palm would eventually lose but it would be moot. Even a big $$$ payback can't bring a dead company back.

I'm not saying Palm will or should, but they COULD.

Palm could never win against Sony
I.M. Anonymous @ 7/28/2001 6:55:17 PM #
First of all, do you really think Sony and Handspring would be dumb enough to sign an agreement that doesn't guarantee them access to the OS that is needed for the PDAs they've invested millions on?

And do you really think Palm could win a legal battle with Sony? Don't be silly.

The companies that signed on to license Apple's OS were minor league manufacturers that had no clout with Apple. Palm, on the other hand, was in no position to bargain with Sony, etc.

RE: Good Corporate Politics
I.M. Anonymous @ 7/28/2001 8:17:45 PM #
and more importantly, can PALM afford such legal battle? is not like they have money to throw around these days.

If there is one company who knows how to handle sucker contract, it would be Sony, not PALM.

Handspring i think would just take the route of out innovate and make PALM irrelevant if push come to shove.

so really, it comes down to who got the brain, money and the guts. I would say Palm isn't the top on any of those departments.

RE: Good Corporate Politics
I.M. Anonymous @ 7/28/2001 9:42:27 PM #
A few more great quotes from Palm's SEC report writer, "Nostrademus".

PALM INC (PALM)
Quarterly Report (SEC form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations

http://biz.yahoo.com/e/010411/palm.html

I'd suggest anyone interested in Palms read the whole article. I learned more about the real state of the "Palm economy" in 10 minutes reading the report than I have in the past 3 years I've owned Palms.


"Any litigation regarding patents or other intellectual property could be costly and time-consuming, and divert our management and key personnel from our business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement might also require us to enter into costly royalty or license agreements or indemnify our Palm platform licensees. However, we may not be able to obtain royalty or license agreements on terms acceptable to us, or at all. We also may be subject to significant damages or injunctions against development and sale of our products."

"If the Secure Digital Association does not ratify the Secure Digital input/output ("SDIO") specifications in a timely manner or if the SDIO standards ratified by the Secure Digital Association are not favorable to third party expansion solution developers, the deployment of third party expansion solutions might be delayed or affected, which could negatively impact sales of our products that include Secure Digital expansion slots, such as the m500 and m505 devices."

"Our ability to successfully offer our products and implement our business plan in a rapidly evolving market requires an effective planning and management process. We continue to increase the scope of our operations domestically and internationally and have increased our shipments and headcount substantially. At February 25, 2000, we had a total of approximately 878 regular employees. At March 2, 2001, we had a total of approximately 1,524 regular employees. This growth has placed a significant strain on our management systems and resources."

RE: Good Corporate Politics
I.M. Anonymous @ 7/28/2001 10:02:12 PM #
If they only counted those employees who did any REAL work at Palm they'd have closer to 400 employees. The rest are parasites that are sucking the company dry. Palm is one of the best examples of a high tech company with a bloated payroll full of people who don't do a damn thing.

Compare this to what a tiny company like TRG (HandEra) has been able to produce with a workforce of something like 50 - 100 employees.

RE: Good Corporate Politics
I.M. Anonymous @ 7/29/2001 4:41:46 PM #
HS has 258 employees

RE: Good Corporate Politics
I.M. Anonymous @ 7/30/2001 12:04:02 PM #
Handspring has 258 employees - is that with or without the 40 who were dropped last week?

Also for sale.

I.M. Anonymous @ 7/28/2001 3:53:41 PM #
Next up in the selling block, Palm.net subsidiary, lead by Carl "Palm economy" Yankowsky.

How much do you think this package will worth in IPO these days? two mcDonald medium fries coupons maybe?

Palm should start reading their own reports!

I.M. Anonymous @ 7/28/2001 5:57:37 PM #
Some prophetic quotes from Palm’s October, 2000 SEC filing:

http://biz.yahoo.com/e/001012/palm.html


IF WE DO NOT CORRECTLY ANTICIPATE DEMAND FOR OUR PRODUCTS, WE MAY NOT BE ABLE TO SECURE SUFFICIENT QUANTITIES OR COST-EFFECTIVE PRODUCTION OF OUR HANDHELD DEVICES OR WE COULD HAVE COSTLY EXCESS PRODUCTION OR INVENTORIES.

Historically, we have seen steady increases in demand for our products and have generally been able to increase production to meet that demand. However, the demand for our products depends on many factors and is difficult to forecast, in part due to the market for our products being relatively new and currently experiencing high growth rates. As we introduce and support multiple handheld device products and as competition in the market for our products intensifies, we expect that it will become more difficult to forecast demand. Significant unanticipated fluctuations in demand could adversely impact our financial results and cause the following problems in our operations:
- If demand increases beyond what we forecast, we would have to rapidly increase production at our third party manufacturers. We depend on our suppliers to provide additional volumes of components and those suppliers might not be able to increase production rapidly enough to meet unexpected demand. There is the risk that even if we are able to procure enough components, our third party manufacturers might not be able to produce enough of our devices to meet the market demand for our products. The inability of either our manufacturers or our suppliers to increase production rapidly enough could cause us to fail to meet customer demand.
- Rapid increases in production levels to meet unanticipated demand could result in higher costs for manufacturing and supply of components and other expenses. These higher costs could lower our profits. Furthermore, if production is increased rapidly, manufacturing yields could decline, which may also lower our profits.
- If forecasted demand does not develop, we could have excess production resulting in higher inventories of finished products and components, which would use cash and could lead to write-offs of some or all of the excess inventories. Lower than forecasted demand could also result in excess manufacturing capacity at our third party manufacturers and failure to meet some minimum purchase commitments, each of which could result in lower margins.


WE DO NOT KNOW IF THE PALM PLATFORM LICENSING AND INTERNET SERVICES PARTS OF OUR BUSINESS WILL BE ABLE TO GENERATE SIGNIFICANT REVENUE IN THE FUTURE, AND WE WILL CONTINUE TO RELY ON OUR HANDHELD DEVICE PRODUCTS AS THE PRIMARY SOURCE OF OUR REVENUE FOR THE FORESEEABLE FUTURE.

Our future growth and a significant portion of our future revenue depend on the commercial success of our Palm handheld devices, which comprise the primary product line that we currently offer. We expanded our Palm platform licensing and Internet services parts of our business only recently, and these parts of our business have generated a small percentage of our revenues. If revenues from our device business do not grow, our other business activities may not be able to compensate for this shortfall.


IF WE FAIL TO EFFECTIVELY RESPOND TO COMPETITION FROM PRODUCTS INTRODUCED BY LICENSEES OF OUR PALM PLATFORM OR IF OUR LICENSEES FAIL TO SELL PRODUCTS BASED ON THE PALM PLATFORM, OUR RESULTS OF OPERATIONS MAY SUFFER AS THE REVENUES WE RECEIVE FROM LICENSE FEES MAY NOT COMPENSATE FOR THE LOSS OF REVENUES FROM OUR DEVICE PRODUCTS.

The success of our business depends on both the sale of handheld device products and the licensing of
our Palm platform. However, licensees of our Palm platform offer products that compete directly or indirectly with our handheld computing devices. For example, licensees such as Handspring and Sony use our Palm platform in products that can compete with our handheld devices. In addition, our Palm platform has been licensed by other manufacturers such as Nokia and Kyocera for use in devices such as mobile phones or other similar products that can compete indirectly with our handheld devices. If revenues from our handheld devices suffer because of competition from licensees of our Palm platform, our results of operations would suffer and our ability to implement our business model would be seriously challenged. In addition, our licensees may not be successful in selling products based on the Palm platform, which could harm our business and results of operations.



RE: Palm should start reading their own reports!
I.M. Anonymous @ 7/28/2001 8:24:40 PM #
This is beyond tragic. This is comical.

Personally, if I am the power that be, I would fired everybody that doesn't have anything to do with writing program and designing the gadget itself. I would imagine that would be about less than 100 people hardcore techy, the rest are just lawyers, suits, loosers and interior decorators. (especially fired all the execs, they cost the most and produce the least. All they can do is giving speech and making marketing jingle and think up product packaging instead of a real cool gadgets)

they had almost 1500 people before and all they can come up was m505 and OS 4.0? Mann... So much for multibillion dollar IPO.

a perfect illustration that capitalism does not necessarily translate to efficient capital use.

RE: Palm should start reading their own reports!
I.M. Anonymous @ 7/28/2001 10:44:11 PM #
This is why Palm is almost bankrupt.

The last estimate I saw had them likely burning through their cash reserves by November or December, 2001. (A bit longer if they sold a $200 million parcel of land they have in San Jose, California. Does anyone here know how close to bankruptcy they are now? Based on the m505 sales disaster, I'll bet they will be out of cash by October and looking for loans to keep them afloat. Thank god I sold my Palm stock last year!

RE: Palm should start reading their own reports!
I.M. Anonymous @ 7/28/2001 11:47:23 PM #
I would say if they manage their cash wisely and do some radical management/market stabilization they still can survive for about 3-4 quarters. In last report they say they have about 500M cash.

But without radically new product they won't go anywhere but sinking.

RE: Palm should start reading their own reports!
I.M. Anonymous @ 7/28/2001 11:55:08 PM #
http://biz.yahoo.com/e/010411/palm.html

April 11, 2001

PALM INC (PALM)
Quarterly Report (SEC form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations

"Cash and cash equivalents at March 2, 2001 were $595.9 million, compared to $1,062.1 million at June 2, 2000."

Palm spent "$106.4 million to acquire AnyDay and WeSync"
UNBELIEVABLE!

"We outsource all of our manufacturing to Manufacturers' Services Limited ("MSL") and Flextronics."
"We depend on Flextronics to manufacture some of our device products at its facilities in Mexico, California, Malaysia and Hungary, and the rest of our device products are manufactured by MSL at its Utah facility. We do not have a manufacturing agreement with Flextronics, upon whom we rely to manufacture our device products. We presently order our products on a purchase order basis from Flextronics. The absence of a manufacturing agreement means that, with little or no notice, Flextronics could refuse to continue to manufacture all or some of the units of our devices that we require or change the terms under which it manufactures our device products."
Now where's my Hungarian m505 now, Honey?

"A significant portion of our revenues comes from only a small number of customers. For example, in the third quarter of fiscal 2001, Ingram Micro represented approximately 16% and Staples represented approximately 8% of our revenues. We expect that the majority of our revenues will continue to depend on sales of our handheld devices to a small number of customers. Any downturn in the business of these customers could seriously harm our revenues and results of operations."
So that's why they bend over backwards for Staples...

"In November 2000, Palm entered into a seven-year master lease agreement with Societe Generale Financial Corporation relating to its future headquarters facility that will be constructed in San Jose, California. The property site is approximately 39 acres, and is intended to eventually accommodate 1.6 million square feet of general office facilities. Rental payments under the lease agreement will be indexed to the London Interbank Offered Rate, applied to the total cost of the lease. The total cost of the lease will include the cost of the land plus the construction cost of the first phase of the facilities (approximately 620,000 square feet), which together are expected to cost up to $460 million. Palm has the ability to purchase the property from the lessor at any time prior to the expiration of the lease for the remaining lease balance, and may, at its option, remarket the property prior to the end of the lease. Palm has guaranteed the payment and performance of the lessor under certain promissory notes made by the lessor with respect to the property. Under the terms of the lease agreements, Palm is required to place on deposit up to $460 million of investment securities as collateral for the term of the lease. As of March 2, 2001, the amount of the collateral was approximately $238 million."
How decadent. now you know why you're paying $450 for an m505...


RE: Palm should start reading their own reports!
I.M. Anonymous @ 7/31/2001 12:56:19 PM #
Palm fleeced us all. They're getting exactly what the deserve.

The root of all mismanagement.

I.M. Anonymous @ 7/28/2001 10:57:47 PM #
From Oct 12' '00 SEC report


"Research and development expenses were $30.3 million for the first quarter of fiscal 2001, increasing by 150% compared to the same period in fiscal 2000. Research and development expenses increased as a percentage of revenue from 6.9% in the first quarter of fiscal 2000 to 7.6% in the first quarter of fiscal 2001. The increases in absolute dollars and as a percentage of revenues compared to the prior year were primarily due to increased spending on headcount and related expenses. These increases were required to support an increasing number of new product introductions, and to expand Palm's development efforts into new product areas such as wireless Internet solutions, platform licensing and web based calendaring. "

They only spent 30M for research? and they have the gall calling themselves a tech company?

You know if they didn't splurge on that 200M plus headquarter and 130M inventory mismanagement. Mabee...just mabee. they could save their own kister by now and have a commanding product that can compete in ARM class niche.

RE: The root of all mismanagement.
I.M. Anonymous @ 7/29/2001 8:59:30 AM #
Okay, I'll bite - how much are they supposed to spend? $100M? $1B? It's kind of hard to pick a number out of the air and say that is how much you should spend. If we assume $150K/employee expense, for example, that's 200 employees - an awful lot of workers for an OS the size of PalmOS. Now, granted, there are hardware and other expenses, but the number isn't exactly out of line. Now, If we assume 100 employees, that's $15M, giving them $15M to spend on hardware/others. This isn't terribly unreasonable. BTW, I work at a large corporation that has developed/supported a number of OS's, and have managed teams that developed some of these OS's, so I kind of have an understanding of how this works.

RE: The root of all mismanagement.
I.M. Anonymous @ 7/29/2001 4:42:59 PM #
I am not sure what sector average is on R&D spending, but 30M sure looks tiny considering they has a 1B cash at the end of '00 and have the ability to plan for 400M new HQ.

why not enhance the survivability of their bread and butter product? Vx to m50x transition sure don't look like they give it a good try. for eg, maybe rewrite the memory management and come up with 16-32Mb models and audio built in?

the point is they could have done better with the given chance and resources but they squander the chance.

RE: The root of all mismanagement.
I.M. Anonymous @ 7/31/2001 12:58:02 PM #
These guys were obviously out of control. They had so much money, they were just looking for ways to blow it. (Typical of many high tech companies in the Bay Area during the boom in the last couple years.) They never bothered to innovate because people were lining up to buy the same old crap year after year. Palm thought they could go on like this forever!

Between 1998 and early 2001, what had really changed in the Palm platform? Was there a significant difference in the OS? In the display? In the price? No. No. No.

RE: The Truth
I.M. Anonymous @ 7/31/2001 1:49:13 PM #
... or in their utter dominance of the handheld market? No, no, no.

RE: The root of all mismanagement.
I.M. Anonymous @ 7/31/2001 2:13:36 PM #
Things seem to be changing now. Yes. Yes. Yes.

Arrogance is not a good quality.

muwahahahahaha......

I.M. Anonymous @ 7/28/2001 11:05:53 PM #
Read this from Palm's own SEC report from OCT '00. I almost die laughing.

"- manage the timing of new product introductions so that we minimize the impact of customers delaying purchases of existing products in anticipation of new product releases."

Oh well.

This one is too precious.

I.M. Anonymous @ 7/28/2001 11:10:50 PM #
"We expect our competitors to continue to improve the performance of their current products and services and to introduce new products, services and technologies. For example, in the first half of calendar 2000, Microsoft introduced a new version of its Windows CE operating system. We believe that Microsoft is investing aggressively to assist its licensees in marketing the Pocket PC line of handheld computers based on this new version of the Windows CE operating system. Successful new product introductions or enhancements by our competitors, or increased market acceptance of competing products, such as the Pocket PC and RIM devices or devices offered by our licensees, such as Handspring and Sony, could reduce the sales and market acceptance of our products and services, cause intense price competition or make our products obsolete. To be competitive, we must continue to invest significant resources in research and development, sales and marketing and customer support. We cannot be sure that we will have sufficient resources to make these investments or that we will be able to make the technological advances necessary to be competitive. Increased competition could result in price reductions, fewer customer orders, reduced margins and loss of market share. Our failure to compete successfully against current or future competitors could seriously harm our business, financial condition and results of operations. "


So I guess if Palm die, there is nobody to blame but themselves, since they know exactly when, what, and who will hit them.

tired of trolls

I.M. Anonymous @ 7/29/2001 3:21:27 AM #
hmm PalmOS has a marketshare of about 88% retail share and people act as if everyone is going to dump it in a few months. That's ridiculous. Palm definitely faces some challenges but they have solutions for each and every one. People will just have to be a bit more patient.
AriB

RE: tired of trolls
I.M. Anonymous @ 7/29/2001 5:14:16 AM #
> Palm definitely faces some challenges but they have solutions for each and every one.


Ummm Ari - wake up! Palm is in imminent danger of going bankrupt in the next six months. We're talking BANKRUPT. As in out of business. That's quite a little "challenge", as you put it.

We'll get a clearer picture in a few weeks when Palm releases its latest quarterly statement. Are you willing to bet me here on this board that they won't be announcing another disastrous quarter? If I'm wrong. I will post a message to this thread September 1 and eat crow.


Jeff Smith
DDS

RE: tired of trolls
I.M. Anonymous @ 7/29/2001 10:18:19 AM #
I agree. There's a lot of doomsaying going on here. Palm just made a good move and all some people can talk about is the bad moves of the past. True, Palm screwed the pooch by preannouncing the m50x but if they have a problem this quarter, its because the econimy is going down the crapper.

You might not realize how bad things are. I got laid off last month and am now on unemployment insurance. Another of my fiends just got laid off from his high tech job. When I went to get my unemployment check, a quarter of the people there used to have high tech jobs. When was the last time you saw an unemployed Unix sys admin?

I'm not whining. I'll get something eventually. I'm only bringing this up to point out that there are a lot of people suddenly more concerned about making the house payment than buying cool gadgets. This is going to hurt Palm's, Sony's, Compaq's bottom lines hard and has nothing to do with Palm's management.

I don't care if the m505 had been a revolutionary product the size of a postage stamp with a holographic interface that can connect directly to my mind. Unless it costs less than $20, I, and a lot of other people, can't afford any more.

This is supposed to be the place where we talk about Palm splitting off its OS division but no one has even mentioned that in about the last 30 comments. Could we talk about that for a while? I think its a good thing. It will really help the whole platform. Can anyone name an example of coopetition really working? I know AOL and MS tried it for a while but now they seem to be at each others throats.

RE: tired of trolls
I.M. Anonymous @ 7/29/2001 10:32:07 AM #
whatever that solutions are, nobody is buying the idea. The market consensus is pretty dismal for the next two quarters.


http://biz.yahoo.com/z/a/p/palm.html

RE: tired of trolls
I.M. Anonymous @ 7/29/2001 10:56:06 AM #
"economy going to crapper"

if the economy is so bad, how come Compaq couldn't even keep that expensive machines of the shelf until lately? Somebody apparently has money, and it's about the size of 450k/unit per quarter. Money wise, that's about the size what Palm is selling mind you. Only Palm spinster dare saying "economic slowdown" as reason not being able to push more gadgets, while the rest of the world say stale products.

sorry, try another excuse for not being able to sell product more.

RE: tired of trolls
I.M. Anonymous @ 7/29/2001 11:22:18 AM #
Don't get me started on Compaq. They screwed up the roll-out of the iPaq so bad it makes the m505 look like a work of genius. They utterly underestimated demand and couldn't produce enough for close to a year. Demand is good but making your customers wait for 6 months isn't. (Can you tell I'm bitter?)

But that was months ago, before the economic downturn started to be really felt. I noticed on Friday they are already offering a $50 rebate on the 64MB version of the iPaq. Could they be trying to increase demand for it by lowering the price? Sounds like the economy is finally starting to catch up to the iPaq.

RE: tired of trolls
I.M. Anonymous @ 7/29/2001 4:59:14 PM #
The rebate is only for 3635. But I sure hope Compaq will be in battle mode soon. Price war is good, 3650 going for 380 does sound good.

RE: Compaq
I.M. Anonymous @ 7/29/2001 5:52:30 PM #
That's my point. Compaq has already dropped the price on their high-end model by $50 to increase sales. Palm hasn't even had to do that for the m505. Sure, you can buy the m505 for cheaper than $450 from some companies on the Net but not directly from Palm. I take this as a sign that the high end iPaq isn't selling too good. Companies with a hot product don't drop the price.

Oh yeah, what fool at Compaq decided that their high end model should have a LOWER number than their mid-range? The high end is the H3635, mid-range is 3650. Dumb.

RE: tired of trolls
I.M. Anonymous @ 7/29/2001 9:18:24 PM #
the 64Mb is 3670. the 3635/3650 was 32Mb sleve/no sleeve. the rebate is the one with sleeve (the rip off $100 sleeve is now $50)

Is this even profitable?

I.M. Anonymous @ 7/29/2001 10:44:48 AM #
here is what bothering me. How will this OS subsidiary make money?

back envelope calculation.

let's just assume it will sharge every single machine $10 for OS license, I would guess around 900k units/quarters (650k from Palm Inc plus guesstimating the rest)
that's $36Million annual revenue.

Does this even pay for tax + exec + building rent?

I'd say it'll be pretty tight.

RE: Is this even profitable?
I.M. Anonymous @ 7/29/2001 11:11:40 AM #
This is why they are only making it a subsidiary, not an actual different company. They are going to make the main company pay for executive salaries and building rent.

They are hoping that sales of handhelds from all the companies (Palm's hardware side, Sony, Handspring...) will be enough to keep the company alive. This just isn't true yet.

In the mean time, if the lack of money coming in from the other companies isn't enough to keep OS R&D alive, they should pay more. I know, they contracted to pay what they are now but they get hurt too if lack of cash delays OS 5. It looks like they expect Palm to pick up the slack. Doesn't seem fair to me.

You can't say Palm is wasting this money, either. They are making approx. $30 million from licencing and spending about that much on R&D. The money the company is wasting is coming from the hardware side.

RE: Is this even profitable?
I.M. Anonymous @ 7/29/2001 1:26:47 PM #
> It looks like they expect Palm to pick up the slack. Doesn't seem fair to me.

Just a minute here, buddy. What advances to the OS has Palm made in the past 4 years? None. They took color support from Handspring and VFS from Sony. Sony, Handspring and TRG/HandEra have made improvements to the platform while Palm has sat around and waited to take advantage of them. Makes me wonder what they're really spending the R+D funds on.

Palm did come up with a vibrating alarm, though. Wow.



RE: Is this even profitable?
Pepper @ 7/29/2001 3:26:58 PM #
actually, the first color palm was the IIIc, NOt the handspring. PALM innovated that one

i know it was a long time a go, but do you realize how much of an IMPROVEMENT os 3 was over os 2? it's AMAZING. but, then again, you've probably never even USED something with os 2

palm added better security (both from 2 --> 3.5, and also in 4)

they replaced the calculator with something that a) looks better, and b) functions better

awhile back palm designed the palm V form factor which was a HUGE success

the back-lit graffitti area is an EXCELLENT feature. i think ALL future units should have lighting on their graffitti area

palm developed the idea of a side rail (although it was awhile ago and with the V series). the rail opened up a whole new world of accessories

they were the first to start using rechargable batteries

they ARE the king of the low-end market (think m100 folks)

they added the clock at a glance and the note pad

Do I really need to continue? Just because these innovations aren't all recent, and just because they aren't all big, doesn't mean they aren't great. Sometimes, it's the small things that make the big differences.

Believe it or not there are still people who see a palm and think "wow, thats amazing. how did they do that?" Just because none of us here are those people, it doesn't mean the product isn't great. it means we're spoiled. It means that most of you are SO ungreatful for all of the things palm has done, and you should get back in touch with reality

-Pepper

I love my Palm . . . do you?

RE: Is this even profitable?
I.M. Anonymous @ 7/29/2001 4:23:10 PM #
ehrr, OS update maybe more in the area of memory management, better graphical engine, multithread and multitasking etc.

vibrating alarm is nice, but not exactly OS upgrade. That's more like your car having extra cup holder feature, instead of electronic ignition system.

RE: Is this even profitable?
I.M. Anonymous @ 7/29/2001 4:47:17 PM #
Get 'em Pepper!

At least someone knows their shit.

RE: Is this even profitable?
I.M. Anonymous @ 7/29/2001 4:51:35 PM #
-IIIc was a desperate attempt to answer E-125

-HS has better built in calc. from the beginning. And CE has freebie HP49g emulation. SO strickly calculator speaking Palm units is a joke.

-Palm was not the rechargable batt. pioneer.



RE: Is this even profitable?
Pepper @ 7/29/2001 7:37:07 PM #
developers who program properly DO have the equivalent of multi tasking

memory management is amazingly great. have you SEEN other oses?

palm (the V) was the first PALM to utilize
rechargable batteries

the calc they use now has what you would need/expect from a BASIC calculator, and not more. If you want something better you BUY a graphing calc or whatever

-Pepper



I love my Palm . . . do you?

PALM IS DOOMED...........
I.M. Anonymous @ 7/30/2001 7:25:05 AM #

Just had to say it....

After all no one has said that for a while.. I figure the trolls are hibernating....

Personally I see Palm surviving, but likely as a subsidiary or associate holding of IBM or Sony. Or perhaps jointly owned by the major device producers

Palm's hardware lacks innovation. So do their OS programmers. It appears that OS 4.0 offers little more than the 3.5 versions that HS and Sony have created.

Companies like these would be more than capable of continuing development and expanding the capabilities of the platform.

Anyway just some thoughts..

Regards

Nick Trevethan

RE: Is this even profitable?
Raishe_werk @ 7/31/2001 12:19:08 PM #
last flame,
wtf is an E-125?
i had to look it up. i hadn't heard of it. i just found out it was a ppc. when i hear ppc, i always thought compaq and hp. guess not, either way its a POS

CNET Review
By Colin Duwe
(09/27/00)
The good: Zippy processor; supports Type II CompactFlash cards.
The bad: Expensive; shaped like a brick.
The bottom line: Casio comes close to delivering a great Pocket PC, but its new offering still rates only second best.

-Raishe
"Monster Pig kills Jesus
More at 11"

Q: Why is Palm still charging $450 for an m505?

I.M. Anonymous @ 7/31/2001 1:21:25 PM #
A: 1) Because they need the money
2) Because they're afraid that lowering the
price will reduce any remaining cachet the
brand has
3) Because they're greedy
4) Because they're idiots
5) Because they're waiting to see how many
people buy the CLIE N610C

> That's my point. Compaq has already dropped the price on their high-end model by $50 to increase sales. Palm hasn't even had to do that for the m505. Sure, you can buy the m505 for cheaper than $450 from some companies on the Net but not directly from Palm. I take this as a sign that the high end iPaq isn't selling too good. Companies with a hot product don't drop the price.


RE: Troll Alert
I.M. Anonymous @ 7/31/2001 1:44:38 PM #
Go crawl back and lick Bill Gates' feet, you troll!! Couldn't stand any criticism of your precious iPaq, could you? Be gone, troll. You're not wanted here.

RE: Q: Why is Palm still charging $450 for an m505?
I.M. Anonymous @ 7/31/2001 2:08:53 PM #
Sounds like you bought an m505 and now realize you made a mistake...

batterie for cassiopeia e-125

I.M. Anonymous @ 1/16/2002 11:13:56 AM #
I want a extended batterie pack for my cassiopeia, that could be connected on the usb/rs-232 port and i don't find one anywhere... Someone knows where i can have one to extend my batterie life?

thanks
J-MICHEL

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