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Comments on: palmOne Presentation and Shareholder Vote

Palm has posted a corporate road show presentation titled "Defining Mobile Computing" that it is taking to institutional investors in anticipation of a stockholder meeting set for Oct. 28. The presentation relates to palmOne, Inc., the company that is expected to succeed Palm, Inc., pending a successful stockholder vote.
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pa1mOne brands

The Ugly Truth @ 10/22/2003 3:09:19 AM #
There should also be a Varant Majarian© brand to appeal to the geek headbanger demographic. It could be a sub-subbrand of Zire.

Sometimes the truth just isn't pretty™

RE: pa1mOne brands
graph @ 10/22/2003 9:18:43 AM #
Do you think some people might pronounce it as PAL-MONE?

Interesting Talk...

Operator99 @ 10/22/2003 11:19:44 AM #
...but Ed should rehearse before presenting to the world. Will be interesting to see how many share holders/users will sit through a 38 minute presentation.

RE: Interesting Talk...
Admin @ 10/22/2003 11:39:56 AM #
Is it really 38 minutes? I didn't get a chance to watch the whole thing before posting.

anyone care to summarize?

-Ryan

RE: Interesting Talk...
bedohave @ 10/22/2003 1:53:40 PM #
Here are the highlights:

* Described the anticipated transaction to spin off palmsource (palm shareholders getting about 0.32 shares of palmsource per share of palm, inc.) and the subsequent merger of Handspring and what remains of palm, inc. (i.e. palm solutions group) with Handspring shareholders getting about 0.09 shares of the remains of the palm,inc company per share of Handspring.

* Vision: handheld computing will become a central and critical part of everyone's lives. palmone will maintain its leadership in this growing market.

* How they'll achieve vision? 3 business focuses: extend market leadership (now have leading market share, lots of units, lots of partners including distribution, carriers, manufacturing), grow the market (IDC projecting a 40%+ increase in overall handheld market with a 60%+ increase in smartphones), achieve consistent profitably (concentration of cost management, strong inventory management, outsourcing mfg & support).

* Outlined the leadership & board of the new palmone company (see above).

* Strategic advantage: relentless focus on customer, innovation (technology, like Treo, and business, like the branding and packaging of Zire) that matters, strategic partering, global reach.

* customer segmentation: 4 categories of users span from personal to corporate users and are entry-level, media savvy, professional, enterprise. Zire is for entry and multi-media users, Tungsten & Treo is for professional (largest customer base traditionally) and enterprise users.

* Touted the breadth and completeness of the palmone product line.

* Touted the newly introduced T|E, T|T3, and Treo 600 (including its global reach, integrated messaging, carrier partners like orange, Sprint, Cingular, T-Mobile, & ATT as well as email + PIM synchronization partners like good)

* Reviewed financials, showing improvement in revenue, and reduction in expenses year-over-year. Showed how
revenue varies widely from quarter to quarter because of the Spring & Fall product introduction cycle and the e.o.y. holiday sales.

* Cost reductions came with tighter management (including a "should cost" program that predicts then controls for the cost of developing and rolling out new products and much better inventory management).

* Also highlighted stronger cash management (AR, AP, opperating costs) aided by the better inventory management and logistics.

* Described upcoming investor-related events including October 28th shareholders meeting to vote on merger. October 29th expected first day of trading on NASDAQ as PLMO and PSRC.

There are more details but the www.talkpoint.com sight became unreachable/busy as I was listening to the presentation.

Hope this helps,

Mike

RE: Interesting Talk...
Admin @ 10/22/2003 3:05:11 PM #
Thanks Mike!
RE: Interesting spinning
The Ugly Truth @ 10/23/2003 3:09:22 AM #
...achieve consistent profitably (concentration of cost management, strong inventory management, outsourcing mfg & support).


I think many would now argue that recent decisions regarding outsourcing of manufacturing (China) and support (India) may end up costing Palm a lot more than they "saved". Units returned because of manufacturing defects or because customers are frustrated with perceived declining quality of support will quickly burn through what few profits the company has been attempting to generate.

Sometimes the truth just isn't pretty™

RE: Interesting Talk...
hoplites @ 10/23/2003 9:26:50 AM #
How else do you think they will be able to reached consistent annual profitability? (in this case consistently negative)
RE: Interesting Talk...
mikecane @ 10/23/2003 1:51:15 PM #
And has *any* PPC licensee aside from hp/Compaq made money from their license?

RE: Interesting Talk...
hoplites @ 10/23/2003 5:39:46 PM #
I don't know, but nobody burns through 800M, I can tell you that.
RE: Interesting Talk...
hotpaw4 @ 10/24/2003 12:29:29 PM #
> I don't know, but nobody burns through 800M, I can tell you that.

Do we really know how much all the various licensee's lost doing WindowsCE clamshells and handhelds? Or how much Apple burned developing the Newton MessagePad?

RE: Interesting Talk...
hoplites @ 10/25/2003 12:07:49 AM #
Definitely not 800M.

Summary of Palm's September 26, 2003 SEC filing

The Ugly Truth @ 10/22/2003 11:29:41 PM #
http://www.edgar-online.com/bin/edgardoc/finSys_main.asp?dcn=0001193125-03-054359&nad=

- For fiscal years 2003, 2002 and 2001, no single country outside the United States accounted for 10% or more of total revenues. Total revenues in the United States totaled $492.5 million, $643.9 million and $940.5 million and total revenues in other geographic locations totaled $345.1 million, $360.5 million and $592.7 million in fiscal years 2003, 2002 and 2001, respectively.

- 2001, 2002, 2003 financial comparisons: http://eol.finsys.com/edgar_conv_html/2003/09/26/0001193125-03-054359.html#DS4A_HTM_TX20718_125


- Year end statement (ending May, 2003): http://eol.finsys.com/edgar_conv_html/2003/09/26/0001193125-03-054359.html#DS4A_HTM_TX20718_143_1

- As of June 30, 2003, we had a total of 674 employees, of which 82 were in supply chain, 204 were in engineering, 258 were in sales and marketing and 130 were in general and administrative activities.

- [After the Palm/Handspring merger] We also expect to obtain improved operating efficiencies of approximately $25 million of cost savings annually. The cost savings assume combined employee reductions of approximately 125 people...

- The fiscal year 2003 restructuring charges of $19.1 million consist of: $6.1 million of severance, benefits and related costs related to workforce reductions, primarily in the United States, of approximately 140 regular employees. As of May 31, 2003, approximately 120 regular employees had been terminated...

- the fourth quarter fiscal year 2002 restructuring charges related to workforce reductions across all geographic regions of approximately 90 regular employees...

- ...the second quarter fiscal year 2002 restructuring actions related to workforce reductions across all geographic regions of approximately 210 regular employees...

- In connection with the merger agreement, Palm and Handspring have entered into a loan agreement pursuant to which Palm will provide up to $20 million in term loans to Handspring.

- Commencing at the effective time of the Handspring merger and continuing for a period of two years, each of Edward T. Colligan, Donna L. Dubinsky and Jeffrey C. Hawkins agrees not to solicit, encourage, or take any other action which is intended to induce or encourage, any employee of Palm to terminate his or her employment with Palm, or to solicit business in any territory where Palm is engaged in business...

- We currently outsource all of our manufacturing and much of the hardware design of our devices to third party manufacturers. This outsourcing extends from prototyping to volume manufacturing and includes activities such as material procurement, final assembly, test, quality control and shipment to distribution centers. The majority of our products are assembled in China and Mexico.

- Revenues for fiscal year 2003 were $837.6 million, a decrease of $166.8 million or approximately 17% from revenues for fiscal year 2002. The average selling price of our handheld devices decreased to approximately $171 per unit in fiscal year 2003 from approximately $192 per unit in fiscal year 2002, accounting for more than 50% of the overall decrease in revenues. Net unit shipments of devices were 4.2 million units in fiscal year 2003 compared to 4.4 million units in fiscal year 2002...

- Net cash used in operating activities during fiscal year 2003 was approximately $55.0 million and we anticipate a similar or lesser amount over the next 12 months, which would be satisfied by our May 31, 2003 cash and cash equivalents balance of $199.0 million.

- On August 28, 2003, we obtained a two-year, $30 million revolving credit line from Silicon Valley Bank...

- ...we sold 1.2 million shares of common stock to an institutional investor for proceeds of $18.0 million. As of August 29, 2003, we had entered into agreements to sell an additional 1.2 million shares of common stock to institutional investors for additional proceeds of approximately $19.1 million.

- The Xerox litigation agreement governs Palm’s and PalmSource’s obligations with respect to the current patent litigation with Xerox. The agreement returns the responsibility for the defense and indemnity of the Xerox litigation from PalmSource back to Palm.

- In the fourth quarter of fiscal year 2001, we incurred impairment charges of $106.7 million consisting of a $47.7 million impairment of goodwill and intangible assets related to the AnyDay acquisition, due to the AnyDay acquisition performing below expectations, and a $59.0 million impairment charge related to the land on which we had previously intended to build our new corporate headquarters.

[Remember AnyDay? Wow!]

- In the fourth quarter of fiscal year 2001, we recorded an inventory related charge of $268.9 million, or 17.5% of revenues, captioned ‘Cost of revenues—charge (benefit) for special excess inventory and related costs...

- In the third quarter of fiscal year 2003, we incurred an impairment charge of $102.5 million, including $100.0 million related to approximately 39 acres of land in San Jose, California owned by us. Market conditions for commercial real estate in the Silicon Valley have deteriorated since the land was acquired in May 2001... Additionally, a $2.5 million impairment charge was recorded related to the core technology acquired as a result of the December 2001 business combination with ThinAirApps, Inc. The core technology of ThinAirApps is no longer considered useful, and its carrying value is not considered to be recoverable.

- The amended and restated intercompany loan agreement, or the intercompany loan agreement, governs the outstanding $20 million intercompany loan from Palm to PalmSource Holding Company, a wholly owned subsidiary of PalmSource. All amounts due under the intercompany loan by PalmSource will be forgiven if the PalmSource distribution occurs prior to December 3, 2004 and PalmSource issues a $15 million 5% convertible subordinated note due December 2006, the PalmSource note. To the extent that PalmSource assumes less than $15 million of the principal amount of such promissory note, PalmSource will make a new note in favor of Palm with a principal amount equal to the difference between $15 million and the principal amount assumed.
andAt the date of the PalmSource distribution, PalmSource will assume $15.0 million of a note payable to Texas Instruments by Palm, which bears interest at 5.0% per annum and is due December 6, 2006. [Very tricky, boys...]

- In December 2001, Palm entered into the software license agreement with PalmSource, which was amended and restated in June 2003. David C. Nagel, one of our directors, is the President and Chief Executive Officer of PalmSource. Under the software license agreement, we recorded aggregate payments of $21.1 million to PalmSource in fiscal year 2002 and $38.9 million in fiscal year 2003 respectively. The agreement establishes minimum annual license and royalty commitments which are $37.5 million for the contract year ending December 3, 2003 and $39.0 million for the contract year ending December 3, 2004. [i.e. how PalmSource will turn a profit.]

- Nepotism 101: Palm entered into a business consulting agreement effective as of June 2002 with Satjiv Chahil, who was formerly Palm’s Chief Marketing Officer. Under this consulting agreement, Palm paid Mr. Chahil approximately $0.4 million in consulting fees during fiscal year 2003. In fiscal year 2003, Palm made a $1.0 million equity investment in and entered into a product procurement agreement with Mobile Digital Media, Inc., a company founded by Barry Cottle, the former Senior Vice President and Chief Internet Officer of Palm until his employment with Palm terminated in February 2002. Palm paid $4.6 million for products purchased under the product procurement agreement during fiscal year 2003. These products were purchased by Palm for resale. In fiscal year 2003, Palm purchased $0.3 million of software licenses and services from Kontiki, Inc. Michael Homer, a current member of Palm’s board of directors, is the Chairman and Chief Executive Officer of Kontiki, Inc.


© 2003. The Ugly Truth, Inc.

Sometimes the truth just isn't pretty™

RE: Summary of Palm's September 26, 2003 SEC filing
mikecane @ 10/23/2003 1:48:02 PM #
Tch, tch. You are usually better than that. Did you bother to go to http://www.kontiki.com/ ?

RE: Summary of Palm's September 26, 2003 SEC filing
mikecane @ 10/23/2003 1:49:40 PM #
>>>- Revenues for fiscal year 2003 were $837.6 million, a decrease of $166.8 million or approximately 17% from revenues for fiscal year 2002. The average selling price of our handheld devices decreased to approximately $171 per unit in fiscal year 2003 from approximately $192 per unit in fiscal year 2002, accounting for more than 50% of the overall decrease in revenues. Net unit shipments of devices were 4.2 million units in fiscal year 2003 compared to 4.4 million units in fiscal year 2002...

How can anyone here complain about *that*?! PalmOne might not like it but it means *lower prices* for us buyers.

RE: Summary of Palm's September 26, 2003 SEC filing
The Ugly Truth @ 10/24/2003 10:59:15 AM #
Tch, tch. You are usually better than that. Did you bother to go to http://www.kontiki.com/ ?

I don't get your point. Palm paid their former exec for essentially useless services. What else does the website say?


Sometimes the truth just isn't pretty™

RE: Summary of Palm's September 26, 2003 SEC filing
The Ugly Truth @ 10/27/2003 2:25:31 PM #
How can anyone here complain about *that*?! PalmOne might not like it but it means *lower prices* for us buyers.

Palm can't afford narrowing margins when their sales are also slumping. They would never generate a profit at that rate. How long do you think Palm could continue as an independent, solvent company at the rate they're currently burning through cash? You would enjoy those cheaper Palm right up until the day Palm went bankrupt. Then what? Be careful whay you wish for.

Projecting the rate of decline in PDA sales, Palm will have burned through its reserves by the end of 2004, with no turnaround in site. Microsoft and Symbian/Nokia would be laughing right now if it wasn't for the close presence of Sony.


Sometimes the truth just isn't pretty™

How many engineers did the AnyDay fiasco cost Palm?

The Ugly Truth @ 10/24/2003 11:02:13 AM #
$47.7 million impairment of goodwill and intangible assets related to the AnyDay acquisition, due to the AnyDay acquisition performing below expectations

At a salary of $100,000/year each, Palm could have paid 117.5 engineers for four years with that 47.7 million. Which would be worth more to Palm now?

Sometimes the truth just isn't pretty™

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