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Palm Reports Q3 FY 2010 Results

Palm, Inc. today reported that total revenues on a GAAP basis in the third quarter of fiscal year 2010, ended Feb. 26, 2010, were $349.9 million. Gross profit and gross margin on a GAAP basis were $47.0 million and 13.4 percent, respectively. In accordance with two recently released accounting standards related to revenue recognition, these results include the effects of accounting for multiple-element arrangements, including ratable revenue recognition for the future deliverables for Palm webOS products as required by GAAP.

"Our recent underperformance has been very disappointing, but the potential for Palm remains strong," said Jon Rubinstein, Palm chairman and chief executive officer. "The work we're doing to improve sales is having an impact, we're making great progress on future products, and we're looking forward to upcoming launches with new carrier partners. Most importantly, we have built a unique and highly differentiated platform in webOS, which will provide us with a considerable - and growing - advantage as we move forward."

To facilitate comparisons to Palm's historical results, Palm has included non-GAAP adjusted measures, which exclude the impact of accounting for multiple-element arrangements, stock-based compensation and other items detailed in the notes section of this release. The company believes this information will help investors better evaluate its current period performance and trends in its business.

Non-GAAP Adjusted Revenues in the third quarter totaled $366.0 million, and non-GAAP Adjusted Gross Profit was $63.5 million. Non-GAAP Adjusted Gross Margin was 17.3 percent and was impacted by a $45.3 million charge taken in the quarter for reserves for inventory purchase commitments, which exceed current forecasted demand. Excluding the impact of the inventory purchase commitment reserves, non-GAAP Adjusted Gross Margin in the third quarter would have been 29.7 percent.

The company shipped a total of 960,000 smartphone units during the quarter, representing a 23 percent increase from the second quarter of fiscal year 2010 and an almost 300 percent increase versus the third quarter of fiscal year 2009. Smartphone sell-through for the third quarter was 408,000 units, down 29 percent from the second quarter of fiscal year 2010 and down 15 percent year-over-year.

On a GAAP basis, net loss attributable to common stockholders for the third quarter of fiscal year 2010 was $(22.0) million, or $(0.13) per diluted common share. This compares to a net loss attributable to common stockholders for the second quarter of fiscal year 2010 of $(13.7) million, or $(0.09) per diluted share, and to a net loss attributable to common stockholders for the third quarter of fiscal year 2009 of $(98.0) million, or $(0.89) per diluted common share.

The company's net loss attributable to common stockholders on a GAAP basis reflects accounting guidance, effective in the first quarter of fiscal year 2010, which requires the anti-dilutive provisions of Palm's series C preferred shares and related warrants to be treated as derivatives for financial reporting purposes. The fair value of the derivatives was estimated as of the first day of fiscal year 2010 and is marked to market on a quarterly basis, with any change in value reflected in the company's financial results for the period. The series C derivatives balance was $82.1 million at the end of the third quarter of fiscal year 2010 compared to $178.7 million at the end of the second quarter of fiscal year 2010. This reduction in fair value resulted in a $96.6 million non-cash gain on series C derivatives and was reflected in the company's third quarter GAAP financial results. With regard to the series C derivatives, any future increases in Palm's stock price from period to period will be reflected as a non-cash loss on these derivatives in the company's financial results, and any future decreases will be reflected as a non-cash gain in the company's financial results.

Non-GAAP Net Loss for the third quarter of fiscal year 2010 was $(102.8) million, or $(0.61) per diluted share. This compares to a non-GAAP Net Loss for the second quarter of fiscal year 2010 of $(45.5) million, or $(0.29) per diluted share, and to a non-GAAP Net Loss for the third quarter of fiscal year 2009 of $(94.7) million, or $(0.86) per diluted share.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the third quarter of fiscal year 2010 totaled $(5.7) million. EBITDA, adjusted to exclude the effect of ratable revenue recognition, stock-based compensation, net other income (expense), restructuring charges, a casualty recovery, a gain on the sale of auction rate securities and a gain on series C derivatives, or Adjusted EBITDA, totaled $(90.2) million.

The company's cash, cash equivalents and short-term investments balance was $591.9 million at the end of the third quarter of fiscal year 2010. Cash used from operations for the third quarter of fiscal year 2010 was $(0.5) million.

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OUCH!

mikecane @ 3/18/2010 2:04:10 PM # Q
>>>was impacted by a $45.3 million charge taken in the quarter for reserves for inventory purchase commitments, which exceed current forecasted demand.

Man, that must have given some people a sinking feeling in their stomachs.

>>>The company shipped a total of 960,000 smartphone units during the quarter... Smartphone sell-through for the third quarter was 408,000 units, down 29 percent from the second quarter of fiscal year 2010 and down 15 percent year-over-year.

That's also not good. The population is small and the percent keeps dropping.

Ouch.

RE: OUCH!
jca666us @ 3/18/2010 2:11:36 PM # Q
With 591 million in the bank, they certainly have enough cash to limp along for several more quarters.

Here's hoping they can create some compelling devices while they still can.

Hopefully they can gain some traction before windows 7 devices hit the market.

RE: OUCH!
SeldomVisitor @ 3/18/2010 4:38:59 PM # Q
Understand, however, that Palm said cash burn for the to-be-reported quarter (the one it's in now) will be essentially double AND Palm continues to be $400 million in debt.

So that "$500+ million cash" isn't quite as rosy as it appears.

RE: OUCH!
jca666us @ 3/18/2010 6:08:16 PM # Q
I missed that - so I guess we'll start seeing layoffs and other cost cutting measures.

With 400k devices gathering dust, it'll be a while before we see any new hardware.

Palm had better start looking for a buyer - quickly.

RE: OUCH!
hkklife @ 3/18/2010 6:49:49 PM # Q
Now we know why Rubinstein said (@ CES IIRC) that they had no new hardware plans on the horizon and were going to make it through the year w/ Pixi & Pre. Presumably, they will spend the remainder of the year trying to stay afloat, plugging away at WebOS and getting the "Plus" variants rolled out onto other networks.

My fearless predictions for the next 6 months of 2010:

1. AT&T will either not launch the WebOS devices at all or have a very, very, downsized launch with zero fanfare. These units will be overlooked entirely in the hysteria around iPad, iPhone OS 4.0 & multitasking, new iPhones, and the announcement of the renewal of the AT&T iPhone exclusivity.

2. T-Mobile will NOT launch any new Palm products.

3. The mythical C40 will not appear this May/June for Sprint as rumored. If it appears at all, it will be pushed back until October.

4. The WebOS twins will make a rather abrupt disappearance from Verizon shelves sometime in the next few months.

5. Palm will not release a WiMax device on Sprint anytime this year.

6. Palm will attempt to reposition themselves as a "rogue" independent hardware provider and will push slim-margin unlocked GSM handsets (ala Google & Nexus One but without the margins) on their website. Think a GSM Pixi Plus for $299 and a Pre Plus for $399. If the AT&T deal falls through, we may even see a repeat performance of the Treo Pro saga. As you may recall, AT&T never officially sold it as a carrier-sanctioned or endorsed device, but Palm sold it unlocked online & through various other retailers. Best Buy also sold AT&T "compatible" Treo Pros at a subsidized, discounted price w/ 2yr contracts despite the fact that att.com or AT&T retail stores didn't offer the Pro.
Pilot 1000->Pilot 5000->PalmPilot Pro->IIIe->Vx->m505->T|T->T|T2->T|C->T|T3->T|T5->Zodiac 2->TX->Verizon Treo 700P->Verizon Treo 755p->Verizon Moto Droid

RE: OUCH!
SeldomVisitor @ 3/19/2010 3:16:51 AM # Q
> Now we know why Rubinstein said (@ CES IIRC) that they had no new
> hardware plans on the horizon and were going to make it through the year
> w/ Pixi & Pre...

!!!

I don't know of this - certainly goes against just about every Palm-the-stock's Pumpers' stance on what's coming Real Soon Now!

I think you might be mistaken.

In other news, the transcript is now available:

http://seekingalpha.com/article/194491-palm-inc-f3q10-qtr-end-02-26-10-earnings-call-transcript?page=-1

RE: OUCH!
jca666us @ 3/19/2010 7:38:35 AM # M Q
Peter Misek, Canaccord Adams: He repeats his Sell rating, and drops his price target to zero from $4.

"with what appears to be roughly 12 months of cash on hand, an accelerating burn ratio, a complete lack of earnings visibility and substantial debt and preferred equity, we no longer see any value in the company's common equity."

Ilya Grozovsky, Morgan Jospeh: He downgrades the stock to Sell from Hold, and reduces his target to zero.

RE: OUCH!
mikecane @ 3/19/2010 8:13:09 AM # Q
>>>and drops his price target to zero from $4.

That is an even bigger OUCH!

Maybe Asus would like to buy them? They could morph it into a tablet OS and have a unique product. Certainly the hp Slate is going to be a loser -- Win7 on a frikkin *Atom* CPU? Android on Tegra2 will kick its ass. webOS on a Tegra2 might be even better. Just ... drop the Gesture Area!

RE: OUCH!
SeldomVisitor @ 3/19/2010 8:23:47 AM # Q
RE: OUCH!
hkklife @ 3/19/2010 9:29:04 AM # Q
Asus has already announced plans to spin off its (crown jewel IMO) PC component/OEM/peripheral biz into "Pegatron" (I kid you not--they supposedly combined "Pegasus" with "Megatron") and will keep Asus around for their branded PCs/notebooks/netbooks and are targeting Apple, Acer, Dell et al. And they ALREADY have Asrock as their budget-oriented mobo subsidiary!

http://www.semiaccurate.com/2010/02/11/asus-pegatron-spin-drawing-close/

The above article address all of that, plus Tegra/Android stuff.

So, yeah, some Asian firm flush with cash and itching to make big inroads into the US market could still conceivably gobble up (ie overpay) Palm. So far, Acer's riding high on PCs but has stunk it up the handheld & smartphone entries. Asus is definitely a possibility. So is Foxconn but i don't think they'd want to jump right in and compete with with the likes of Apple, Google, HTC and RIM.

SV, I would certainly swear I read such a comment from Ruby back in January or early Feb! I would not make such a thing up, especially in light of the "C40" rumors for Sprint. Of course, he already likely knew of the looming inventory pileup issues back then so it's not like he was going to let the cat out of the bag w.r.t. any future releases that would Osborne the current lineup. But I really do recall one of the (EverythingPre? Palm Addicts?) enthusiast sites I don't regularly frequent posting such info. IIRC this was after the "I've never used an iPhone" and after the Pre Plus & Pixi Plus announcements/
Pilot 1000->Pilot 5000->PalmPilot Pro->IIIe->Vx->m505->T|T->T|T2->T|C->T|T3->T|T5->Zodiac 2->TX->Verizon Treo 700P->Verizon Treo 755p->Verizon Moto Droid

RE: OUCH!
2klbs @ 3/19/2010 11:24:54 AM # Q
SV and HKKLife:

The "family of products" lines have been ambivalent and blurred on the two calls prior:

Ruby says dedicated to "family of products" for WebOS:

http://seekingalpha.com/article/162120-palm-f1q10-qtr-end-8-29-09-earnings-call-transcript?page=4

"We have talked about families of products and yes, I am a big believe(r) in families of products and we will continue to evolve our product line into the future and have a variety of products that support Web OS."

and a bit further:

"Well, as we've said, we are going to be focusing all of our effort in the future on building Web OS products and so while there are still Centros and Treo Pros moving through the channel right now, our future engineering efforts are based around Web OS because we are absolutely confident in where we are going with Web OS."

3 months later Ruby changes his slant:

http://seekingalpha.com/article/178819-palm-inc-f2q10-qtr-end-11-27-09-earnings-call-transcript?page=5

"Well, we're not going to talk about specific products in the future but let me say in general we don't believe in building large portfolios of products. Our focus is around having a small family of really great products. Right now we have two great products in Pre and Pixi and our objective right now is to expand with more carriers and more regions"

Also sadly shook my head on love & love lost with Sprint between Aug and now...
Not "Pre-verted"- Android Assimilation?

RE: OUCH!
jca666us @ 3/19/2010 11:40:14 AM # M Q
coming soon to ruby's family of products:

popper - a toilet bowl with a built in dockng station for the pre and pixie devices along with a mypoop web app - for remote control of the pooper - a real game changer! lol

seriously, I think ruby had some good ideas when he started at Palm, however he's not CEO material - implementation of his plans was sub-par.

RE: OUCH!
SeldomVisitor @ 3/19/2010 12:46:36 PM # Q
@2klbs - thanks, that's right, I remember now - and hk - there's yer words.

RE: OUCH!
hkklife @ 3/19/2010 1:18:27 PM # Q
2klbs;

Thanks much for the linky. I was searching furiously in Jan 2010 for Ruby's comments. I was a month off. Time flies when you're trying to adapt to a new platform, no?


Pilot 1000->Pilot 5000->PalmPilot Pro->IIIe->Vx->m505->T|T->T|T2->T|C->T|T3->T|T5->Zodiac 2->TX->Verizon Treo 700P->Verizon Treo 755p->Verizon Moto Droid

RE: OUCH!
CFreymarc @ 3/21/2010 11:02:00 AM # Q
So who is short selling Palm stock?
Reply to this comment

Not a good call

pretastic @ 3/18/2010 3:42:26 PM # Q
I was really looking for Palm management to make some positive announcement either about the success of current initiatives, or a new initiative with the potential to increase revenues. I heard discussion of managing costs and continuing efforts to increase sales at Verizon, but nothing more than "some anecdotal evidence" that things are starting to improve. I guess judging by the stock action after hours, my disappointment was shared by others.

Since Verizon only sold Palm products for part of the quarter, by my calculation, Palm needs to increase its Verizon sales by nearly 50% in order just to clear its channel inventory during the current quarter. This seems a tall order. On the other hand, it does seem to be about in line with analysts' original expectations for the Q3 run rate and management does seem appropriately focused on getting its products into the hands of both sales reps and customers. Should make for consumers getting some great deals. I just hope that Palm can pull it off.

I also wonder how much a drop off in sales at Sprint might have hurt results given that they are left without the latest Palm phones and seem not to be promoting them as much at present. Or is my impression not correct? They seem to me to be promoting their Android phones now more than the Pre or Pixi, which is sad but not surprising given the phones' recent success at generating consumer interest.

RE: Not a good call
jca666us @ 3/18/2010 4:07:17 PM # Q
Stock's down 14% - time for a buyer.
RE: Not a good call
LiveFaith @ 3/18/2010 6:07:34 PM # Q
Still 2 high IMHO.
Pat Horne
RE: Not a good call
gmayhak @ 3/18/2010 7:10:16 PM # Q
http://my.att.net/s/editorial.dll?bfromind=8450&eeid=7189078&_sitecat=214&dcatid=0&eetype=article&render=y&ac=1&ck=&ch=ne

"After Jeffries revealed the revenue forecast in a conference call, the shares fell 74 cents, or 13 percent, to $4.91 in after-hours trading. If the shares stay at that level in Friday trading, they will set a new 52-week low. The shares have traded as high as $18.09 in the past year.
Palm was a pioneer in the smart phone business, but it lagged as BlackBerry maker Research in Motion Ltd. gobbled up the corporate market and Apple Inc.'s iPhone charmed consumers. More recently, Google Inc.'s Android software for smart phones has gained traction at Palm's expense."

If there is a moral to this story it's 'you don't piss on those that helped you succeed ! '

Most of us have moved on to iPhone or Android.

Gary

ps, I ordered my iPad today :-)
Tech Center Labs

RE: Not a good call
BaalthazaaR @ 3/18/2010 7:31:07 PM # Q
gmayhak wrote:
If there is a moral to this story it's 'you don't piss on those that helped you succeed ! '

Most of us have moved on to iPhone or Android.

Gary

ps, I ordered my iPad today :-)

Amen to that!

RE: Not a good call
gmayhak @ 3/18/2010 7:41:51 PM # Q
To clarify for those new to this forum...

Palm had a huge software development community, some had dedicated years producing superb software tools for Palm OS (Orbforms is an example, http://www.orbworks.com/orbforms/ )

Palm changes to web OS with no regard for the thousands of man-hours that have been devoted to Palm OS by their supporters and development community, for what?

Apple introduces a totally new product, iPad. Guess what, compatible with existing apps and will support higher resolution versions = Happy developers.

Gary

Tech Center Labs

RE: Not a good call
rpa @ 3/18/2010 7:51:11 PM # Q
Yeah, Palm's finished. Now need to decide on iPhone or an Android unit. Several HTC models will be available in Hong Kong in another month so many Android choices.
RE: Not a good call
hkklife @ 3/18/2010 8:04:18 PM # Q
rpa;

For the record, I'm (terribly delayed, unfortunately) still working on a "Longtime Palm user's experiences migrating to Android" piece for PIC. And I just got a like-new Centro for my secondary line in case my 755p dies, so I'm still going to keep a foothold in Garnet for the forseeable future.

Personally, I feel that Android the lesser of all the current smartphone evils. iPhone is too restrictive in the hardware choices & carrier offerings. I demand a removable battery and a physical keyboard. WinMob 7 isn't going to be any better and is far too dumbed-down for my tastes. BlackBerry OS is terribly antiquated. Symbian/Maemo/MeeGo is dead in the water in the US market. So that leaves Android and WebOS. And for the time being, I feel Android has the edge due to the flexibility/customizations available to users, wide variety of hardware, a lot of new momentum this year, and the deep pockets of Google. PIMs still suck compared to Garnet, unfortunately.

If I was overseas, I might think differently. But basically being tied to Verizon for network/coverage reasons, I'm making do decently well on the Droid but I know I'm not going to ever be as productive as I was in inputting or recalling data as I was on my old Treo...
Pilot 1000->Pilot 5000->PalmPilot Pro->IIIe->Vx->m505->T|T->T|T2->T|C->T|T3->T|T5->Zodiac 2->TX->Verizon Treo 700P->Verizon Treo 755p->Verizon Moto Droid

RE: Not a good call
gmayhak @ 3/18/2010 8:05:22 PM # Q
Web OS really had me upset in the beginning, like your girl friend or wife saying 'I don't love you anymore'. But, in retrospect, I'm having more fun with iPhone apps and see a better future with Apple because they are still innovating.
Today my Quantum Computer was approved ;-) http://itunes.apple.com/us/app/qubits-clock/id361966323?mt=8

22 apps so far and just getting warmed up!

Gary
Tech Center Labs

RE: Not a good call
SeldomVisitor @ 3/19/2010 3:19:02 AM # Q
I think you're gonna succeed mightily with the iPad.

Even =I= am interested in that device...and THAT is saying something!

RE: Not a good call
jca666us @ 3/19/2010 5:34:11 AM # Q
gary, did you order the wifi ipad or the 3g version?
RE: Not a good call
gmayhak @ 3/19/2010 7:28:15 AM # Q
I ordered the 16gb wifi, I would have to stand on the roof of my house to get a 3g connection. I see it as a larger version of my iPod Touch. Also ordered the case and the simple dock but the case won't arrive until the 20th.

SV, from what I see using the simulator the higher resolution makes a huge difference, apps look great in 2X and when they are re-written for the iPad you get much more image detail.

Gary
Tech Center Labs

RE: Not a good call
pretastic @ 3/19/2010 9:30:50 AM # Q
Thanks for the background info. Wondered why so many here seemed a bit bitter and negative. As a former Treo user, I feel ur pain. Despite the fact I still can't do some things I did with the Treo, I can do many others, some better, and overall really really like my Pre. Have experienced all this before with technology changing, and just have to say that if you can get over the frustration of the extra work involved in migrating to a new platform, often times a year or two out you have forgotten it all and are happily moving forward using the new product and enjoying its newer features. I really hope for the sake of us Pre owners that some of you developers are able to forgive and forget and create some great apps for us to make our user experience even better.

I am a bit stubborn and contrary myself, probably why I am not about to abandon a phone I really like and which is a great value for me, and why I find these calls for Palm to fail and go away a bit like all the other times analysts yell "sell" at the bottom. I recall that one of the best buy signals ever was when the brokerage firm I used dropped coverage of a stock. While a couple stocks might have floundered subsequently, 80% were significantly higher one to two years out. Of course, so many hedge funds in this name both long and short, analysts are not dropping coverage, so they are dropping their price targets to zero; so seems this is essentially the same thing. Not for the short term or conservative, but for longer term spec, may have some appeal.

Big question is whether Palm can pull off a strong comeback. With the stock hitting new lows, they must be awake now and realize that their survival is at stake. If nothing else, will be very interesting to see how they respond.

RE: Not a good call
hkklife @ 3/19/2010 9:45:08 AM # Q
Gary, any thoughts regarding the resolution used for the iPad? It's not ideal for movie-viewing, for one. Do you think it being 1024x768 as opposed to 1366x768 or something similar will make a huge difference one way or the other in the long term?

I assume 1024x768 chosen for easy up-scalability with the current 320x480 on the iPhone/iPod Touch?
Pilot 1000->Pilot 5000->PalmPilot Pro->IIIe->Vx->m505->T|T->T|T2->T|C->T|T3->T|T5->Zodiac 2->TX->Verizon Treo 700P->Verizon Treo 755p->Verizon Moto Droid

RE: Not a good call
gmayhak @ 3/19/2010 10:56:59 AM # Q
Apple seems to like the old 4:3 ratio and maybe it makes sense for this type product, maybe it's a reincarnation of the 12" PowerBook.
http://lowendmac.com/musings/10mm/12-inch-successor.html

If they optimized the aspect ratio for watching widescreen videos it might not be as well suited for ebooks or surfing and the pop up keyboard might be awkward in landscape mode.

I think in the long term it won't make or break the success of the iPad.

Gary
Tech Center Labs

Reply to this comment

Best case/worst case scenarios

nastebu @ 3/19/2010 10:04:09 AM # Q
The financial reporting might as well by Finnish to me, I understand so little. To help me understand it, can someone speculate on the two extremes of the spectrum? In other words, two instances; over the next six months to a year, what does the future for Palm look like if...

1.) everything goes very right

2.) everything goes very wrong

RE: Best case/worst case scenarios
rpa @ 3/19/2010 10:50:13 AM # Q
1. Palm still exists as a functioning enterprise. Unlikely.
2. Palm no longer exists and has filed chapter 11 or has been acquired or both. Probable.

Next.

RE: Best case/worst case scenarios
pretastic @ 3/19/2010 11:08:19 AM # Q
That's pretty easy. The hard part is handicapping the outcomes.

Everything goes very right: a year from now Palm is a significant and profitable player in the smartphone market.

Everything goes very wrong: After a string of bad quarters and non-existant sales, the company's assets are put up for sale in bankruptcy.

There is also the possibility that things just drag on for many quarters, with some being up, some down, before one of the above occurs.

If someone gives you a one sided, dismissive answer, they have an ax to grind. The fact is no one knows the future. There are many factors such as the economy, technological innovation and consumer tastes, among many. Good managements find a way to survive and then thrive. This current management team is relatively untested, has made some errors and is now facing a big challenge. Can the company turn things around? Stay tuned. Should at least be interesting watching.

RE: Best case/worst case scenarios
SeldomVisitor @ 3/19/2010 12:52:10 PM # Q
It EASILY could be that there literally is no hope for Palm other than a severe decline in stock price then the inevitable buyout - pre- or post-bankruptcy.

We now know Palm's has 1.15 MILLION phones in inventory or MORE (by far) than an entire quarter's worth of superlative sell-through.

That's simply pitiful.

It means NO ONE'S gonna be buying enough Pres and Pixis to help Palm pay the bills for a LONG time - maybe TWO quarters!?

Palm said cash burn this quarter would be $150+ million yet they remain $400 million in debt - at SOME point their creditors may start making noises. as their cash dwindles to well below their debt level. If the creditors think there is little value in Palm OTHER than their cash (as the Market appears to think right now) they may be in for a FORCED liquidation.


RE: Best case/worst case scenarios
hkklife @ 3/19/2010 1:17:15 PM # Q
As I've said before:

Palm needs to go ahead and mimic Google (out of sheer desperation, naturally) and go "rogue" and start selling these things unsibsidized/unlocked on palm.com ASAP at a steep discount. Or partner with someone (BB? Amazon?) and move these guys out en masse at retail or some other avenue.

$250 for all Pixis. $299 for all Pixi Pluses, $350 for all Pre, $399 for all Pre Pluses. No contracts, no subsidies, no B.S. Just selling these things as straight-up retail devices. If AT&T takes a pass on the WebOS devices, then dump whatever inventory was earmarked for AT&T via the same method. Ruby blamed Verizon last month for their Plus rollout woes and now they are blaming Sprint for their Verizon woes. The finger-pointing with AT&T will begin soon enough. So, c'mon, Ruby, give those nasty carriers a fat middle finger and do an end-run entirely around them to show 'em that lil' Palm can still shake up the system!

Furthermore, release some kind of WebOS 1.4.2 update that will let users "officially" and "legally" bypass the onerous device activation and use them as wi-fi tablets. Also let users access their device data even if the data service is cancelled. This will do wonders to stir up interest from guys like Gary who don't/can't want another contract + expensive monthly service but want to play around with a WebOS device. Finally, release some kind of one-way "dump to desktop" sync utility in case Palm goes tits-up and users want to move their PIM data back to their PCs as a .CSV file or something.

All of the above recommendations might not get them in the black but it'll clear inventory, shake up the moribund wireless industry from its stagnant "contract + subsidy" model, stir up some developer interest, make Google look brilliant, and put Palm's name back in the limelight if only for a few more fleeting moments.
Pilot 1000->Pilot 5000->PalmPilot Pro->IIIe->Vx->m505->T|T->T|T2->T|C->T|T3->T|T5->Zodiac 2->TX->Verizon Treo 700P->Verizon Treo 755p->Verizon Moto Droid

RE: Best case/worst case scenarios
pretastic @ 3/19/2010 2:36:57 PM # Q
Seldom, I have no idea where you are getting your numbers. I calculated channel inventory at approx 760k units. This is still a lot considering they only sold 408k last quarter, but actually inline with original expectations for the quarter. Remember also that they only were on Verizon for about two-thirds of the quarter. The company did not comment on what acceptable inventory levels are, but obviously it depends on the sales run-rate. If that increases, a little more inventory is necessary. Nor did the company specify a number for cash burn, only that it would be higher than one would expect based on the coming quarter, since some obligations were not paid in Q3, resulting in the abnormally low burn for last quarter.
RE: Best case/worst case scenarios
pretastic @ 3/19/2010 2:53:44 PM # Q
A real cynic might also say that now that the stock has plunged, an LBO may be on the way, perhaps with the participation of some of the very hedge funds that have been involved on the downside. Then once bought in at a nice cheap price, the company's fortunes miraculously begin to turn around. Naw, that would never happen....
RE: Best case/worst case scenarios
SeldomVisitor @ 3/19/2010 2:55:59 PM # Q
That 1.15 million number comes from one of the "analysts":

http://digitaldaily.allthingsd.com/20100319/palm-inventory-issues/


RE: Best case/worst case scenarios
SeldomVisitor @ 3/19/2010 3:01:19 PM # Q
With respect to cash burn they said it would be - twice - the level of the last regular cash burn of $90-ish million.

From the transcript:

== "...And so, if you look at Q4, you should look beyond the operating
== results for Q4 in terms of cash burn and include in there. Some
== portion of the Q3 liabilities that will be paid in Q4.
==
== Ehud Gelblum Morgan Stanley
==
== Okay. So the working capital didn't reverse itself the way we thought it was
== going to. So we are going to get that $80 million of hit from working capital,
== whatever it was plus the normal cash burn that would have come out with $150
== million quarter. So we could be looking at something north of $200 million. Is that
== cash burn?..."

RE: Best case/worst case scenarios
pretastic @ 3/19/2010 3:18:20 PM # Q
Thanks Seldom, cash burn quote you gave is exactly right; doesn't specify a number, only more than what one would expect based on operating results for q4. What those are depends entirely on what happens: might be more than $150, might be less.

See my calc below for channel inventory. Reasonable on your part to quote an analyst, but his numbers seem suspect.

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