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Palm Reports Preliminary Q2 FY09 Financial Results

New Palm Inc LogoPalm Inc. today released its preliminary results for its second quarter of fiscal year 2009, which ended Nov. 28, 2008. In short, the news is pretty brutal with Palm's total revenue experiencing a massive contraction during the past couple of months. Revenues dropped nearly 45% from the same quarter last year, and could see a decline of as much as 48% from the previous quarter.

Palm places the blame on its "maturing" product line and "unprecedented dynamics in the global markets" given the current economic meltdown. The company vows to reign in costs even further and goes on to detail some of its latest cost-savings initiatives in the accompanying press release.

The Press Release is as follows:

Palm Reports Preliminary Q2 FY09 Results

Palm Implements Programs To Reduce Operating Expenses by 20% by Q4 FY09

SUNNYVALE, Calif., Dec 01, 2008 (BUSINESS WIRE) - Palm, Inc. (NASDAQ: PALM) today reported preliminary results for its second quarter of fiscal year 2009, which ended Nov. 28, 2008.

The company announced that it expects to record revenues for Q2 fiscal year 2009 in the range of $190 million to $195 million. The revenue decline vs. the company's Q1 fiscal year 2009 and Q2 fiscal year 2008 is a result of reduced demand for maturing smartphone and handheld products. The company stated that while it had expected these factors to pressure revenue in its November 2008 and February 2009 quarters, the difficult economic environment has greatly intensified the negative impact on product sales.

"We are seeing unprecedented dynamics in the global markets as economic uncertainty hampers demand for consumer products," said Ed Colligan, Palm's president and chief executive officer. "In order to ensure Palm's long-term success during these uncertain times, we're taking several steps to significantly reduce our cost structure. These measures will help us navigate this difficult period while launching our next-generation products as planned."

The company is currently implementing several cost-savings initiatives, including reducing its U.S. work force, consolidating its European operations, and shifting responsibility for Asia Pacific sales, marketing and administrative support to its U.S. offices. The company expects that by Q4 fiscal year 2009, these actions and other cost-savings initiatives will reduce quarterly operating expenses by approximately $20 million vs. Q1 fiscal year 2009 levels.

The restructuring charges associated with these and other measures will be recorded as expenses are incurred. In Q2 fiscal year 2009, these charges are expected to total between $7 million and $9 million. Second quarter operating expenses, which will include these charges, are expected to be in line with what the company recorded in Q1 fiscal year 2009.

Palm also announced that it expects its Q2 fiscal year 2009 gross margin as a percent of revenue to be between 18 percent and 19 percent, after accounting for the impact of a charge for inventory component purchase commitments. This charge is expected to be in the range of $10 million to $15 million. The company also expects its cash and short-term investments balance to be between $210 million and $220 million at the end of its second quarter.

Separately, Palm stated that in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," it expects to record a valuation allowance on its U.S. deferred tax assets of approximately $400 million during the quarter. The increase in the valuation allowance does not reflect a change in Palm's outlook, nor will it alter Palm's ability to utilize the underlying net operating loss carry forwards.

Palm will report its complete second quarter fiscal year 2009 financial results on Thursday, Dec. 18, 2008 and will host a conference call to review the complete financial results beginning at 1:30 p.m. PT / 4:30 p.m. ET.

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Palm just Big Time warned

SeldomVisitor @ 12/1/2008 1:54:22 PM # Q
Palm's hurting majorly - just warned and mentioned relatively poor "gross margins" compared to what they had predicted:

- http://biz.yahoo.com/bw/081201/20081201006074.html?.v=1

[Palm didn't give MUCH numerical guidance so perhaps the word "warned" is a little out of place, but one item they DID discuss was gross margins - and they just missed those numbers rather thoroughly]

RE: Palm just Big Time warned
PacManFoo @ 12/1/2008 4:55:03 PM # Q
Nothing the Clause can't take care!

The last known classic PDA user.
RE: Palm just Big Time warned
Gekko @ 12/1/2008 5:10:29 PM # Q
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Should make for an interesting conference call

freakout @ 12/1/2008 3:22:50 PM # Q
So the big question is, when does Nova come riding to the rescue? Not much time left for a 2008 announcement.
RE: Should make for an interesting conference call
dagwud @ 12/1/2008 3:33:30 PM # Q
At the risk of repeating myself in support of your comment, "Leak something, already!"

Just bought a cradle for my TX that I can use at work, and I'm thinking about picking up a backup unit for when this one dies. Either that, or I'm going to pull my Vx out of the closet and party like it's 1999.

Still have the Stowaway keyboard to use with the Vx, too. Probably needs a new battery though.

-
PalmPilot Pro (1997) -> III (1998) -> Vx (1999) -> m500 (2001) -> m515 (2002) -> Tx (2007)

RE: Should make for an interesting conference call
PacManFoo @ 12/1/2008 4:58:04 PM # Q
I have to agree, if there really is a Nova then Palm better start playing some cards otherwise it's game over.

You got to know when to hold 'em, know when to fold 'em, know when to walk away, know when to run.
-Kenny Rogers

The last known classic PDA user.

RE: Should make for an interesting conference call
Gekko @ 12/1/2008 5:12:09 PM # Q

>Just bought a cradle for my TX that I can use at work, and I'm thinking about picking up a backup unit for when this one dies.

stop being a walking anachronism and throw out the pda and welcome to 2003.

RE: Should make for an interesting conference call
PacManFoo @ 12/1/2008 6:30:26 PM # Q
It kills you that people still want to use PDA's doesn't it.

The last known classic PDA user.
RE: Should make for an interesting conference call
joad @ 12/1/2008 10:18:01 PM # Q
Easy now. Gekko's still bummed out that his Centro wasn't available in his favorite color.

By the time Palm burns through the rest of the Crayola 64 palette maybe we'll get a leak about Nova from them. Crossing my fingers.....


Paying my annual PDA update tax to Palm since 1997.

RE: Should make for an interesting conference call
dagwud @ 12/2/2008 9:01:22 AM # Q
>stop being a walking anachronism and throw out the pda and welcome to 2003.

I wear bow ties and braces, and write with a fountain pen. Anachronism is a feature, not a bug.

-
PalmPilot Pro (1997) -> III (1998) -> Vx (1999) -> m500 (2001) -> m515 (2002) -> Tx (2007)

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And then there's Nokia

mikecane @ 12/1/2008 5:20:10 PM # Q
What will the frozen Finns announce on Wednesday?

After all this buildup, I expect to have a Great Big Laugh.

RE: And then there's Nokia
mikecane @ 12/2/2008 10:27:56 AM # Q
Wait. That's IT?! THAT is the Big Nokia Suprise Announcement?

NEXT!

RE: And then there's Nokia
SeldomVisitor @ 12/2/2008 11:57:32 AM # Q
I don't know, actually - I =think= THE big surprise was supposed to be announced =Wednesday=.

RE: And then there's Nokia
mikecane @ 12/2/2008 12:19:20 PM # Q
That's what I thought too. Then I wondered if their Wednesday is AHEAD of ours, being they're so close to the former USSR.

Bueller? Bueller? Anyone know EuroTime?

RE: And then there's Nokia
SeldomVisitor @ 12/2/2008 1:35:38 PM # Q
You can assume they're near Greenwich time - they see the Sun about 5 hours before we do.

Reply to this comment

Palm: On track to become a historical footnote

Gekko @ 12/1/2008 5:37:07 PM # Q

December 1st, 2008
Palm: On track to become a historical footnote

Posted by Sam Diaz @ 2:38 pm

Remember when Palm - maker of the Pilot and Tungsten PDAs and later the Treo smartphone - was the dominant player in the handheld device business? Today, it's a completely different landscape. Apple's iPhone has recently dominated the smartphone space. RIM is making a big push with the launch of consumer-friendly versions of the Blackberry. And Google has now entered the space with its Android operating system and the G1 device for T-Mobile. For Palm, pretty much a minor player these days, the future doesn't look so hot.

http://blogs.zdnet.com/BTL/?p=11035

RE: Palm: On track to become a historical footnote
Rastick @ 12/1/2008 10:14:45 PM # Q
Consumer Reports just rated Smart Phones and ranked the AT&T Centro slightly higher than the iPhone, and the Sprint/Verizon Centro a little lower. It is very interesting that they ranked the iPhone 10th.

Of course, CR have always seemed to have an irrational bias towards WinMo-based phones...

RE: Palm: On track to become a historical footnote
joad @ 12/1/2008 10:26:14 PM # Q
Even with the wind to their backs, still water and a clear ocean ahead, Palm seemed to have a unique ability to spin around in circles aimlessly.

Even CR says the iPhone is still mostly inferior to the PalmOS Treo, but if Palm gives them a few more years maybe Apple can finally implement a real keyboard, add some buttons and beef up the OS so Palm can finally die in their sleep.


Paying my annual PDA update tax to Palm since 1997.

Reply to this comment

Selling at cost?

joad @ 12/1/2008 10:35:11 PM # Q
So, killing off the higher margin Treos in favor of the Centros isn't producing a lot of dough for Palm, and their "power user" customers are getting fed up and leaving. Big surprise?



Paying my annual PDA update tax to Palm since 1997.

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What are all these vultures doing here?

Nycran @ 12/2/2008 4:52:05 AM # Q
If the economic crisis is to be held responsible for a 48% drop in sales, let's see how Apple and RIM fair for the same time period. If they're still kicking goals then Palm's argument is null and void.

Man I hope they live long enough to release Nova. And I agree, some kind of firm announcement this side of 2009 would be heartening.

RE: What are all these vultures doing here?
SeldomVisitor @ 12/2/2008 6:02:06 AM # Q
> If the economic crisis is to be held responsible for a 48% drop in sales...

Not sales, but revenue.

- http://discussion.treocentral.com/showpost.php?p=1528073&postcount=146

Giggle.

RE: What are all these vultures doing here?
AdamaDBrown @ 12/2/2008 9:36:13 PM # Q
It would be interesting to compare sales to revenue. If revenue is dropping faster than sales-and I would say that's a very good bet-then Palm's losing what few sales they had left in the high end sector, and people are being less drawn to the Palm brand versus other smartphones.

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You have until the 15th, Palm

mikecane @ 12/2/2008 10:31:05 AM # Q
To frikkin LEAK something!

If you won't do it here at PIC, drop it into my email.
http://mikecane2008.wordpress.com/about/

If you impress ME, you know you have something.

If not, Ta-Ta.

RE: You have until the 15th, Palm
SeldomVisitor @ 12/2/2008 12:03:14 PM # Q
Interesting theory put forward on Yahoo about "The Palm Decline" - on PURPOSE!

> 1) company makes blunders
> 2) EP says "oh, we're very happy with progress
> 3) new product underwraps, unseen, but EP very happy with progress
> 4) launch phones with no carriers
> 5) sales fall
> 6) share price drops to below 1.00
> 7) company gets delisting notice
> 8) EP says, hey, let's not mess with the exchange anymore,
> with price in the pennies, we'll take 'em private
> 9) well whaddya know...nova has successful launch, new game
> stopper products hit the street EP hugely rich
> 10) shareholders screwed

- http://tinyurl.com/palmsinister

RE: You have until the 15th, Palm
mikecane @ 12/2/2008 12:21:46 PM # Q
HAHAHAHAHAHA. I think even Gekko would marvel at that strategy.

I'd really love nothing better than for Palm to ACTUALLY HAVE a frikkin MONSTAH BREAKTHROUGH HIT.

I'd be able to preserve a decade of frikkin Palmic data, for one.

For second, it'd make Apple move faster (it seems to be on Palm Time in regard to iPhone ...).

RE: You have until the 15th, Palm
hkklife @ 12/2/2008 6:14:12 PM # Q
Not since the Heather-bot have seen such a sterling example of direct interaction between a company and its users.

Claus him/her/itself has appeared on the TreoCentral forums and is fielding questions from the community!!

http://discussion.treocentral.com/showpost.php?p=1528232&postcount=14

I recommend we bombard them with a list of THE most pressing questions facing the Palm OS community.

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

RE: You have until the 15th, Palm
hkklife @ 12/2/2008 6:20:36 PM # Q
Brilliant, brilliant strategy. This would be the perfect culmination of the smoke'n mirrors shell games Palm ha been playing with their developer base, shareholders, and users for a good 8-9 years now.

I too would absolutely love to eat crow & wind up with mud on my face. I'd love to sit here and hear an endless stream of "I told you so"s from Tim & Jeff Kirvin & the Vampire Lestat.

Mike brings up a good point, one I've mentioned a few times in the past. Ever since Apple hit the ground running with the iPhone (or actually starting maybe with the previous round of MacBook/iMac/iPod refreshes), Apple's started trotting out new hardware with incremental improvements and moving at a glacier's pace to respond to the competition. Of course, since the entire industry seems utterly incapable of combining the power of WinMob + Apple UI & media savvy + RIM's corporate friendliness + Palm's PIM and 3rd party apps, what's the point of Apple exerting themselves? Just go out there and try to buy a high capacity HD-based MP3 player. There ARE none aside from that miserable iPod Classic!

As Gekko likes to say, "Death can come quickly to a market leader". Apple may be wishing they had a netbook or a larger tablet-style device up their sleeves in a year's time.

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

RE: You have until the 15th, Palm
SeldomVisitor @ 12/3/2008 5:26:58 AM # Q
> ...Claus him/her/itself has appeared on the TreoCentral forums
> and is fielding questions from the community!!

I don't know if you noticed it or not, but he appeared HERE as well with the same sort of SPAM. I managed to get in a reply AS his SPAM was being removed...that reply was relocated to a different article's comments, however, and now replies to nothing!:

- http://www.palminfocenter.com/comments/7251/#146534

Game over
madmaxmedia @ 12/3/2008 12:01:05 PM # Q
Even if somehow Palm had a sinister plan to devalue its stock and then release a hit in Nova, it's too late.

Noa could've been a hit a year ago perhaps, and definitely when Cobalt was stillborn. But the entire playing field has changed since then. The zen of Palm is but a distant memory. The days of simply making a more stable, modern Palm OS and riding on application compatibility is over.

What's the likelihood that with all this turmoil and false starts, Palm has actually been cooking up a trailblazing new GUI that will blow away everyone else, including the iPhone? Because that's what it would take for Nova to have any impact whatsoever.



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