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Palm Q2 FY09 Conference Call Highlights

New Palm Inc LogoPalm Inc. today reported their sixth consecutive quarterly loss. After pre-announcing significant declines, Palm reported total revenue of $191.6 million with a net loss of $(508.6) million. The larger than usual loss was primarily inflated by a $396.7 million tax provision charge on its U.S. deferred tax assets. On a non-GAAP basis the net loss was still a staggering $(80.2), or $(0.73) per diluted share.

The company also saw a massive contraction in smartphone sell-through, which was down 42% (or about 400k units) from the previous quarter and declined nearly 12% from a year earlier. Stating "We're working through an undeniably difficult period," Palm CEO Ed Colligan squarely placed the blame on the maturing Palm OS line and Centro products combined with the extremely tough economic climate.

Palm HQIn a departure from the usual format, the call began with the outgoing CFO Andy Brown delivering the financial data. Smartphone revenue accounted for 89% of the total at $171 million on 556k units shipped. Handheld revenue came in at $21 million with a sell-through of 150,000 units, a 51% year over year drop off. Palm's average selling price for smartphones rose a bit to $305 due to the newly released Treo Pro. Overall gross margins dropped to 20.1% mostly due to charges related to inventory component purchase commitments.

Andy Brown also talked about Palms recent efforts to contain costs and manage cash burn. Palm currently has around $220 million in cash and is carefully managing that while still ensuring that they adequately fund their next generation product development. Recent cost-savings initiatives, include reducing its U.S. work force by around 10%, consolidating European operations, and shifting responsibility for Asia Pacific sales, marketing and administrative support to its U.S. offices.

Ed Colligan then took the call and began by thanking Andy Brown and wishing him well saying he has been key part of Palms transformational efforts and was particularly instrumental in the recapitalization transaction. Mr. Brown will be stepping down effective Jan 7th, he will be succeeded by Douglas C. Jeffries, who was previously the chief accounting officer at eBay. He then went into the business details and started of saying "clearly we are operating in a extremely tough climate and we expect to face continued challenges in the coming months."

Ed stated they they understand that a new "pipeline of products" is necessary to maintain momentum, and we will soon be replacing our aging product line with its next generation products. He warned there are still a number of rough months ahead, especially during the next quarter. He does not project a possible return to profitability until sometime in calendar year 2010.

In a rare note of positive forecasting, Ed was willing to share was that Palm plans to launch the Treo Pro with a major US carrier during the current quarter. Many months of rumors and a recent internal memo leak, almost certainly point to this being a CDMA version of the Treo Pro on Sprint.

Waiting for Nova...

Palm SlideThe topic of the new operating system was brought up many times, however as before, virtually no hard details were revealed. Eveyone is going to have to wait for the big CES announcement. Colligan said they have had some early disclosures with select carrier partners and developers whom have been "universally excited." Colligan did reaffirm that the first products would ship sometime before the end of Palm's fiscal 2009 (late June) as has been planned. He did let slip a small detail about the new product as he actually referred to the unit specially as a "Phone".

Another key refrain Ed used a number of times throughout the call was that the new OS would have to stand out as a "differentiated product." In response to a question he did state that the new OS and its products would be more targeted towards consumer/prosumer applications and that Windows Mobile would remain as their enterprise product.

Looking Ahead...

A couple of interesting questions came up in the Q&A. One questioner asked if there would be any upcoming product refreshes before Nova. Ed responded that other interesting tidbit is that besides the expected US Treo Pro carrier announcement, there will not be any future product announcements before the next-generation products.

The End of the Handheld Business?
Another analyst plainly asked when it would make sense for Palm to shut down the handheld business. Colligan replied that it continues to sell and they would push them out as long as there is still sufficient demand. However he was quite frank and stated they are not developing new ones, and as such there is an inevitable end to the product line.

The following audio clip is from outgoing CFO Andy Brown talking about Palm's challenges and prospects going forward.

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Goodbye Palm PDA

TooMuch @ 12/18/2008 4:22:01 PM # Q
Sounds like there is no replacement for the TX on the horizon.

RE: Goodbye Palm PDA
PacManFoo @ 12/18/2008 5:09:18 PM # Q
Although those units are three years old, the damn things just keep selling. We won't make anything new though because obviously no one wants handhelds.

The last known classic PDA user.
RE: Goodbye Palm PDA
Gekko @ 12/18/2008 5:20:46 PM # Q

welcome to 2004. let it go.

RE: Goodbye Palm PDA
PacManFoo @ 12/18/2008 5:46:12 PM # Q
Don't tell me, tell those people still buying PDA's!!

The last known classic PDA user.
RE: Goodbye Palm PDA
abosco @ 12/18/2008 10:30:36 PM # Q
welcome to 2004. let it go.

How do you characterize the success of the iPod Touch? Couldn't Palm have done that?

-Bosco
m105 -> NX70v -> NX80v -> iPhone -> iPhone 3G

RE: Goodbye Palm PDA
mikecane @ 12/19/2008 5:17:39 AM # Q
Shhhhh, abosco. Never try to teach a Gekko to see reality. It can't be done and it only annoys the lizard.

RE: Goodbye Palm PDA
Gekko @ 12/19/2008 5:21:29 AM # Q

iPod Touch is not a PDA! it's an iPod!!!!!!!!!!!!

RE: Goodbye Palm PDA
margerum @ 12/19/2008 5:41:45 AM # Q
What would make it a pda? It has pim apps and can run 3rd party applications. I consider the ipod touch a pda and a dam good one at that.

RE: Goodbye Palm PDA
Gekko @ 12/19/2008 5:46:38 AM # Q

the ipod and the zune are MEDIA PLAYERS and 99.9% of the people that buy them use them as MEDIA PLAYERS and NOT as PDAs.

Palm already attempted this once and created the LIFEDRIVE and failed.

secondly, no way is palm going to create a media player that beats ipod. not device-wise, not ecosystem wise, and not coolness factor wise.

IMO, palm's only hope is great unique smartphone + great unique services = great unique experience. anything half-assed will FAIL.

RE: Goodbye Palm PDA
PacManFoo @ 12/19/2008 7:02:01 AM # Q
>>>iPod Touch is not a PDA! it's an iPod!!!!!!!!!!!!

If it looks like a duck and talks like a duck......


>>>Palm already attempted this once and created the LIFEDRIVE and failed.

I'm not sure even Palm knew what the hell they were trying to attempt with the Lifedrive.



The last known classic PDA user.

RE: Goodbye Palm PDA
SFO_TXUSR @ 12/19/2008 8:55:47 AM # Q
The concept that the LifeDrive presented was valid. The problem with that unit was the execution. If Palm had got the execution right the first time around, the product would have sold and we would see a second generation PDA now.

The lesson Palm needs to learn from that experience is to get whatever they are going to release right, support it properly, and grow the market. Unfortunately, all of that takes money that they may not have now, and may not be able to get later. So I wish them luck, but I, for one, am not too optimistic.

RE: Goodbye Palm PDA
Gekko @ 12/19/2008 8:58:39 AM # Q

if the PDA - Personal Digital Assistant - market was actually a viable market, someone would be in it making money. however, the market is dead because very, very few people in the world want to buy a PDA vs. a smartphone.

RE: Goodbye Palm PDA
Gekko @ 12/19/2008 10:17:29 AM # Q

for all you PDA mourners -


Goodbye, PDA...

http://www.youtube.com/watch?v=_IileCvZTEI



RE: Goodbye Palm PDA
abosco @ 12/19/2008 4:17:00 PM # Q
Couldn't Palm have created a device much like the iPod Touch with the Lifedrive?

Their execution sucked. It's not that the market isn't there. It's that Palm sucks at making products people want to buy. The PDA market still exists, and it's still very large, despite what you think.

-Bosco
m105 -> NX70v -> NX80v -> iPhone -> iPhone 3G

RE: Goodbye Palm PDA
Gekko @ 12/20/2008 7:56:44 AM # Q

there is a big IPOD market out there. if you think that Palm can make a BETTER IPOD and has a STRONGER BRAND and a STRINGER ECOSYSTEM than APPLE, then yes, Palm should get into the IPOD business.

Reply to this comment

wrong again

Gekko @ 12/18/2008 5:26:11 PM # Q
>Colligan did reaffirm that the first products would ship sometime before the end of Palm's fiscal 2009 (late June) as has been planned. He did let slip a small detail about the new product as he actually referred to the unit specially as a "Phone".

MikeCon, wrong again

RE: wrong again
mikecane @ 12/18/2008 5:34:01 PM # Q
Not wrong, not yet.

Why aren't you crying over your 401K, anyway?

RE: wrong again
SeldomVisitor @ 12/18/2008 5:47:47 PM # Q
> ...He did let slip a small detail about the new product
> as he actually referred to the unit specially as a "Phone"...

Indeed, this is the first itme that I can remember that it was not referred to as a "device":

== "...Our new platform is nearing completion and our first next
== generation phone is set for launch in the first half of calendar
== year '09 as planned..."

RE: wrong again
AdamaDBrown @ 12/18/2008 6:37:43 PM # Q
Does anyone else think that this sounds a little odd? They're doing the big even at the beginning of January, but they're still not willing to commit to anything more than "first half" of next year for product. It makes me think that either the rumors are wrong, and they're not going to be demoing an actual device in January, or else they haven't got a carrier signed on yet.

RE: wrong again
Gekko @ 12/18/2008 6:42:41 PM # Q

i expect a smoke and mirrors demo something like this -

http://www.youtube.com/watch?v=FPipGn7JmMM

RE: wrong again
hkklife @ 12/18/2008 6:49:05 PM # Q
1. Device(s) isn't ready
2. OS isn't ready but they are scrambling to port Negal's Cobalt Clock demo to Nova in time for its big CES unveiling.
3. No carriers are onboard yet
4. No developers are onboard other than Dataviz for DTG & Astraware for Solitaire & Bejeweled


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: wrong again
Gekko @ 12/18/2008 6:52:24 PM # Q

look! it can multitask playing a midi in the background! look! see the shadow on the second hand!!!

now THIS is innovation!!!!!!!!!!!

RE: wrong again
Gekko @ 12/18/2008 7:11:13 PM # Q

most infamous moments in palm history

1. "yes this really is a gold threaded suit." - yankowski
2. "look at the shadow on the second hand, cobalt really is amazing." - nagel
3. "they're not going to just walk in." - colligan
4. "no, foleo can't do youtube but i wish it has a faster processor." - hawkins

im sure there's more.

RE: wrong again
SeldomVisitor @ 12/19/2008 3:59:40 AM # Q
(1) I, too, think it's gonna be smoke-n-mirrors and the equivalent of slides rather than hands-on.

(2) Palm hasn't said ANYTHING about what is happening January 6th - only the Me-Too Media, blogs, and posters have. Be Careful Out There!

(3) Colligan mentioned carriers and developers yesterday:

Carriers:

== "...As we started early disclosures to potential carrier partners,
== we've been extremely pleased at their positive reaction to our new
== platform and products..."

"Early disclosures".

That's it.

Colligan: "I can imagine that "we're going to have a DYNAMITE platform!"

Potential Carrier: "Swell! Let's talk more when it's ready and debugged."

Developers:

== "...And on the OS front, there are existing developers that we
== have briefed. We want to be sure that we have a robust set of
== applications as we launch the product, but we haven't made it
== a broad-based thing at this point in time and that would be
== further out..."

"Briefed".

That's it.

How's THAT for lack of developers.


RE: wrong again
SeldomVisitor @ 12/19/2008 4:00:16 AM # Q
Pardon - typing in the dark and not watching the screen - January 8th...
RE: wrong again
medevilenemy @ 12/20/2008 7:24:22 PM # Q
Why don't we wait until the actual announcement to reflect on the announcement... and if it goes poorly, we can just blame Colligan.

RE: wrong again
SeldomVisitor @ 12/21/2008 5:38:21 AM # Q
> Why don't we wait until the actual announcement to reflect on the announcement...

Palm wants us to reflect on the announcement; that's why they announced an announcement without saying what was going to be announced.

Buzz.

Free advertising.

So...what do YOU think is going to be announced?

And how!?

Reply to this comment

A PHONE?!

mikecane @ 12/18/2008 5:33:21 PM # Q
Let's see ... how many million iPhones and G1s will there be by June 2009?

Jumping into that is suicidal. I hope it's not PHONE ONLY.

And yeah, kill what they call the "handheld" business - and make way for the TABLET business.

That's my story and I'm sticking to it.

RE: A PHONE?!
Gekko @ 12/18/2008 6:44:17 PM # Q

yes, so they should bet the farm on some niche extraneous contraption product that only a few dozen hipsters want?

RE: A PHONE?!
mikecane @ 12/19/2008 5:19:20 AM # Q
Yeah, Gekko, like, oh I don't know, the *IPOD TOUCH*?

Except BIGGER.

Reply to this comment

Palm. Burn in hell.

VampireLestat @ 12/18/2008 9:16:06 PM # Q
"However he was quite frank and stated they are not developing new ones, and as such there is an inevitable end to the product line." Ref. PDAKillerColligan

On that note, I applaud the disastrous quarter. May Palm go bankrupt and I hope Colligan never gets hired in any other company. Incompetent fools.

RE: Palm. Burn in hell.
medevilenemy @ 12/20/2008 7:32:29 PM # Q
Ok, that is a little excessive. I bet there is still a market for PDAs (though a modern one would require some real innovation), but the market analysts (idiots, of course) have been saying it is dead and the numbers appear to support it. Still, though, Colligan is a fool. I hope that the CES announcement is a success, I really do, but regardless of what happens they have to get rid of him. Whether it is his fault or not (I blake Hawkins, really, for basically losing interest - and the horrible mistake that was the foleo) he is the face of these recent tough times. His presence will really only slow any recovery that may or may not happen.

I do, however, applaud that they've been bringing in some good people to run things. To me, it looks like they are really trying to pull off something huge. We've seen it happen before with other companies, lets reserve judgment until something happens (or fails to do so).

Reply to this comment

ACCESS

NuShrike @ 12/18/2008 11:29:08 PM # Q
They could seriously jump start everything if they just shoved ALP right in. Would people notice? Be at least "years" ahead of NOVA (which means "no go" btw).

Been at a .dotbomb, the cycling of the CFO usually means they can't afford him anymore and he very clearly sees the writing on the wall.

The smart thing to do is to make Styletap full-featured so people can just vacate the obsolete Palm hardware. Hell, even just port the Palm's easier-to-use PIM experience to Windows Mobile (which they haven't even bothered to do) and be done with it.

Even going from the superior OMAP processor in the 800w to the cheaper and slower Qualcomm in the Treo Pro speaks volume.

RE: ACCESS
mandopicker @ 12/19/2008 4:45:14 AM # Q
>They could seriously jump start everything if they just shoved ALP right in. Would >people notice? Be at least "years" ahead of NOVA (which means "no go" btw)

Um...'No va' might mean No Go (Portugese? Spanish?), but 'Nova' (all one word) is Latin for 'New' (as in 'Novus Hominus', New Man, describing the self-made individuals who attained the offices of state in Republican Rome and weren't part of the established aristocratic elite...quoth the pedant).

But yeah I agree: what was so badly wrong with the offering from Access? Evidently *something* was wrong as no-one's got it on a device for market (yet).


Gareth
Palm T/X (on its 2nd screen); Apple Messagepad 120 OS 2.0 (yeah, seriously)

RE: ACCESS
NuShrike @ 12/19/2008 10:15:43 AM # Q
Yes I know about the perennial urban myth of no va vs nova last used in cars. The topic is Palm doesn't get it and shows with these misses on details.

No doubt ALP was something Palm started, and had to avoid all duplication of code by the scorched earth contract with Access. Really smart first move considering even Google beat them to market. iirc, Access is already working, just looking for a carrier partner.

RE: ACCESS
Gekko @ 12/19/2008 10:20:26 AM # Q
RE: ACCESS
FrequentVisitor @ 12/20/2008 9:54:10 AM # Q
There used to be an obnoxious, smarmy poster here called David Schlesinger who worked at Access. What ever happened to him after Access announced that it suddenly was going to go back to the drawing board to completely "reposition" ALP OS?

I'm no stock expert,but these numbers don't seem to bode well for Access:

http://quote.tse.or.jp/tse/quote.cgi?F=listing%2FEDetail1&MKTN=T&QCODE=4813


Access
1979 - 2009
R.I.P.

http://en.wikipedia.org/wiki/Access_Co.



RE: ACCESS
FrequentVisitor @ 12/20/2008 9:56:41 AM # Q
Here's where to see the info on how Access is doing (NOT good!)

Gack!

http://www.tse.or.jp/english/

RE: ACCESS
hkklife @ 12/20/2008 4:05:55 PM # Q
Lefty has posted here 2x or 3x times since the "repositioning" announcement, IIRC.

He didn't specifically mention ALP or their revised focus or any hardware partners or anything like that.

On a related note...

"8) The endgame from Elevation is mere weeks away. It will be the perfect ending for the Palm soap opera. Trust me*."

So do you expect the endgame to occur PRE or POST-CES?

IF the CDMA Sprint Treo Pro does come out, it still may very well be Palm's last-ever release....and I wonder in what volume of handsets have been purchased by Sprint? I wonder if this'll break the near-mythical "blink and you missed it" lifespan of the 800w or the older but not forgotten Sony-Ericsson T608 on Sprint?


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: ACCESS
akalefty @ 12/24/2008 12:34:11 PM # Q
There used to be an obnoxious, smarmy poster here called David Schlesinger who worked at Access.

I'm still around. Not here, particularly: there's not been much of interest going on in this locale for a good while. Still happily and busily employed at ACCESS, which is still a going concern, so that's another two mis-predictions you can add to the lengthy list of things about which Mikey "i-Book-Pod-Touch Air" Cane has been thoroughly in error.

What ever happened to him after Access announced that it suddenly was going to go back to the drawing board to completely "reposition" ALP OS?

I don't recall us ever making any such announcement. Maybe it's something you hallucinated, fantasized or heard from Mikey.

Merry Christmas, guys. Still a few hours left to make amends for your wicked ways and see whether you can possibly forestall another stocking full of nothin' but twigs and coal.



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