Palm Reports Q3 FY07 Results

Posted By: Ryan on Thursday, March 22, 2007 1:06:57 PM

Palm Inc today reported revenue of $410.5 million in the third quarter of fiscal year 2007, ended March 2. Smartphone sell-through for the period reached a company record high totaling 738,000 units, up 30 percent year over year and up 20 percent sequentially.

"We delivered solid results in the third fiscal quarter and continue to expand our global market presence," said Ed Colligan, Palm president and chief executive officer. "Treo smartphone sell-through and revenue reached record levels, and Palm products were available to smartphone customers through seven of the top 10 carriers in the world."

Net income in the fiscal quarter totaled $11.8 million, or $0.11 per diluted share. Net income included stock-based compensation expense of $5.7 million, an in-process research and development charge from acquisitions during the quarter of $3.7 million and amortization of intangible assets of $0.3 million. This compares to net income for the third quarter of fiscal year 2006 of $29.9 million, or $0.28 per diluted share.

Net income for the quarter, on a non-GAAP basis, totaled $16.5 million, or $0.16 per diluted share, excluding stock-based compensation expense, an in-process research and development charge and amortization of intangible assets, and adjusting the income tax provision to 40 percent. This compares to non-GAAP net income in the third quarter of fiscal year 2006 of $19.8 million, or $0.19 per diluted share, excluding the effects of amortization of intangible assets and deferred stock-based compensation, the related income tax provision, and the partial reversal of Palm's valuation allowance against its deferred tax assets.

Fourth Quarter Fiscal Year 2007 Outlook

Based on current trends, Palm provided its outlook for financial results in the fourth quarter of fiscal year 2007, which ends June 1, 2007. The company expects the following:

Revenue to be in the range of $400 million to $410 million;
Gross margin to be between 35.9 percent and 36.4 percent on a GAAP basis and between 36.0 percent and 36.5 percent on a non-GAAP basis;
Operating expenses to be between $130 million and $135 million on a GAAP basis and between $124 million and $129 million on a non-GAAP basis;
Annual tax rate on a GAAP basis of 40 percent and, on a non-GAAP basis, 40 percent;
Earnings per diluted share to be between $0.10 and $0.13 on a GAAP basis and between $0.13 and $0.16 on a non-GAAP basis; and
SFAS 123R stock-based compensation expense, before taxes, to be between $5.0 million and $5.5 million and amortization of intangible assets to be $1.0 million. These amounts and the related income tax amounts are excluded from Palm's fourth quarter of fiscal year 2007 outlook on a non-GAAP basis.

Stay tuned for PIC's coverage of the Palm earnings conference call.

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Treo's up 30%

Surur @ 3/22/2007 4:15:21 PM #

...handhelds down how much?

Surur

They said I only argued for the sake of arguing, but after an hour I convinced them they were wrong...
Hey!! I made associate writer at PDA247. Come see my nattering over there!!
www.clieuk.co.uk/wm.shtml

RE: Treo's up 30%

Ryan @ 3/22/2007 4:22:37 PM #

Don't know the breakdown yet, but I would expect so.

RE: Treo's up 30%

Surur @ 3/22/2007 4:36:50 PM #

It just occurred to me that they recently said they expected a 30% (I cant remember if it was sequential or YoY) reduction in handhelds, as the airplane comes in to land in handhelds.

RE: Treo's up 30%

Surur @ 3/22/2007 4:45:22 PM #

From the call Handhelds 456 000 sold, 40% down YoY.

RE: Treo's up 30%

Ryan @ 3/22/2007 5:25:40 PM #

I thought I heard it was 277,000 handheld units sold, down 44% y/y

Revenue split was 86% smartphones, 14% handhelds

Handheld revenue was $57m, while smphone was $354m

Colligan got notably perturbed by that second takeover rumor question!

RE: Treo's up 30%

Surur @ 3/22/2007 6:22:26 PM #

Handheld revenue $56.4 million
44% decline YoY 277 000 units Sold

sell through 456 000 units
decrease 44% YoY

Inventory of 46 weeks

So basically the retailers sold 456 000,and only ordered 277 000 new ones. Handhelds are phasing out fast.

RE: Treo's up 30%

Surur @ 3/22/2007 6:26:17 PM #

Edit - inventory was 4-6 week.

RE: Treo's up 30%

Scott R @ 3/22/2007 8:19:52 PM #

"So basically the retailers sold 456 000,and only ordered 277 000 new ones. Handhelds are phasing out fast."

Why *would* retailers order more handhelds when the only handhelds available are 2-year-old models? Palm is accelerating the decline of handheld sales by not providing any new models worth wanting. It's not like they (or anyone else) has done all that they could possibly do to improve upon a non-cellphone handheld. There's plenty of innovative ideas out there: gaming-friendly controls, built-in GPS, 4GB of storage with good MP3 software and optimized hard buttons/controls. IMO, they're only shooting themselves in the foot by *not* spending R&D dollars on some of those ideas. In the cellphone market they've got *tons* of competition. With a non-cellphone (aka carrier-controlled) device, they stand the chance of hitting upon a great idea and having very little competition.

http://Tapland.com
- Tapwave Zodiac News, Reviews, & Discussion -

RE: Treo's up 30%

Rhauer @ 3/22/2007 9:35:18 PM #

Scott R - WELL PUT

RE: Treo's up 30%

PacManFoo @ 3/23/2007 8:40:53 AM #

Scott, You are so right! In a day and age when they are trying to make an iPod more like a PDA, all a PDA maker would have had to do is increase the amount of storage and improve the audio. Never understood why Palm or even PPC Makers didn't pursue this route more then they did. Casio tried it with the EM-500 but at the time storage and battery life was a problem. Heck Palm hardly even changed the built in sounds much less tried to make their own MP3/Video software.

PDA's Past and Present:
Palm - IIIxe, Vx, M500, M505, Tungsten T, TX
Handspring - Edge, Platinum, Deluxe
Sony - SJ22
Apple - MP2000, MP2100

RE: Treo's up 30%

halcyon @ 3/23/2007 11:59:08 AM #

Don't forget adding VOIP/SKYPE capabilities. It doesn't seem like they need new technologies and big R&D to make this possible -- we see these things out there already. Just not in Palm flavor or much in the US mass market.

RE: Treo's up 30%

mikecane @ 3/23/2007 4:22:14 PM #

>>>sell through 456 000 units

So close to a half a million people don't matter? I'm not even counting the ones who are still holding onto *older* models.

After the iPhone squishes the sh*t out of them, they'll cling to whatever PDA sales are left like a dead log in the rapids.

That Third Business had better be bloody incredible...

Where is Highlights?

UGlee @ 3/22/2007 4:43:39 PM #

where is the traditional "Highlights of the Quarter" section?

RE: Where is Highlights?

SeldomVisitor @ 3/22/2007 6:47:08 PM #

http://www.highlights.com/

RE: Where is Highlights?

Ryan @ 3/22/2007 7:12:19 PM #

Here's the highlights from the conference call:

http://www.palminfocenter.com/news/9318/palm-q3fy07-conference-call-highlights/

I even made a audio highlights clip of Ed & Andy's comments.

Acquire 2 companies?

icesalmon @ 3/22/2007 11:31:24 PM #

I think I heard that Palm acquired 2 companies for the R&D . Any more information about that?

RE: Acquire 2 companies?

cervezas @ 3/23/2007 1:01:57 AM #

Looks like Chatteremail is one of them.

http://tinyurl.com/3ywaj3

David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog

RE: Acquire 2 companies?

Ryan @ 3/23/2007 1:27:02 AM #

Chattermail is one but I'm not sure about the other and I have a question in. The comment was that they spent $19 million on acquisitions that will be incorporated into future products.

RE: Acquire 2 companies?

SeldomVisitor @ 3/23/2007 6:34:48 AM #

I took the "other" company to be more linux-oriented base don nothing more than:

== "...two small technology acquisitions during the quarter totaling $19 million.
== These acquisitions consisted of technologies that will be used in future products..."

My take on King Colligan's conference call.

VampireLestat @ 3/24/2007 6:35:52 PM #

As made clear in the conference call, Colligan is an arrogant F. He is riding high on his Treo sales and sh**ting all over handheld owners. HE IS FEELING THE POWER! unlike in the days when Palm was in the red and he was much more humble and respectful of consumers.

When PDAs were mentioned in the call, Colligan and/or Brown started CHUCKLING! Colligan then goes on to clearly prove that he lied and has no plans at all to make another serious PDA.

Sickening Colligan pseudo-quotes from the call:
- "We are not commenting on the Palm sale! END OF STORY! Now shut up and leave us majesty alone! Hey, little lady secretary, do you your job; can we have the next question please?!" *then his bitch boy Brown mumbles a few things to back up Master Colligan. Colligan's arrogant hateful response to the 2 guys who asked fair questions about the Palm sale rumours show what kind of man he is.
- "We are managing the PDA decline as best we can". In other words, he has no plan to sell another pda to actually make some sales! He wants the PDA decline.
- "We are investing the PDA profits towards our preferred/serious strategic product, the Treo."
- "We are all happy to announce a 40% decline in PDAs and we are looking forward to 50% or more. We have no plans for this lame market." Logic says that if he PLANS a 50% decline in the next quarter, then Hawkins 3rd business is not a handheld. Colligan has confirmed the death of handhelds WITH HIS COMPANY.

Colligan will go on to abandon handhelds, and he will never regret it, simply because if ever Palm Inc. fails or is sold, Colligan will retire with all his millions or move on to another company, all while smirking at how great he thinks he is.

I strongly enocurage all Palm handheld fans to just move on and go buy PDAs or PDA-phones from companies like HP, HTC, etc.

RE: My take on King Colligan's conference call.

freakout @ 3/24/2007 8:12:34 PM #

"Colligan's arrogant hateful response to the 2 guys who asked fair questions about the Palm sale rumours show what kind of man he is."

Uh... to me he sounded like a man exasperated at being asked the same question over and over, to which the people asking KNOW the answer: "We don't comment on rumours." And that's all the sale talk ever was: a rumour. And a piss-poor one at that. Unnamed "sources" tells some blog that Palm is "in play" (oh, how experienced-businessy-man-sounding). The evidence? They'd hired an investment banker. And... oh, wait, that's it.

If I were him, I'd have been far ruder. (i.e. actually rude at all. which colligan wasn't)

As for the PDA stuff, I agree that they're killing off the market for what seems like no good reason, but I don't think their reasoning is.... quite like you put it.

Tim
I apologise for any and all emoticons that appear in my posts. You may shoot them on sight.
Treo 270 ---> Treo 650 ---> Crimson Treo 680

RE: My take on King Colligan's conference call.

SeldomVisitor @ 3/25/2007 8:51:01 AM #

> ...The evidence? They'd hired an investment banker...

Ahem - that particular piece of "evidence" is itself rumored.

Whatta game!

Watch the Cramer video.

Palm Software on sale