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Much Ado About Sell-Through

It started with a report from Town Hall Research analyst David Eller, which took issue with Palm's definition of "sell-through". Rather than counting the number of smartphones sold to end-users, Palm instead counts how many have been bought by their carrier partners - a number which also includes those devices that are sitting in retail inventory channels, waiting to be snapped up (or not) by customers. Eller's "research" (and do note the scare quotes) indicates that there are eleven weeks' worth of inventory currently in the channel.

From there, the story was picked up by John Paczkowski at Digital Daily, who was content to simply note that Palm might have an inventory glut. Gizmodo ratcheted things up a notch when it ran with the question: "Is the Palm Pre Tanking?" And then the notoriously dour-on-Palm CrunchGear went a sensationalistic step further, conflating Palm's decision to abandon Windows Mobile development with the Pre's assumed "faltering" and declaring that reliable old cliche` that's been going round the traps for years: the End Of Palm is nigh. (They deservedly copped a beating in the comments from Palm fans.)

What to make of all this? Frankly, your correspondent finds it a little overblown. Inventory dumping is something that Palm has been accused of in the past, usually accompanied by dire predictions of the company's Imminent Doom. It hasn't happened yet, and with the Pre set to launch internationally in a few short weeks, more webOS devices in the pipeline and a cashed-up sugar daddy in the form of Elevation Partners it seems unlikely to happen in the near future either.

So my view: take a chill pill, folks. The Pre ain't the iPhone when it comes to sales figures - that much is obvious - but Palm are doing about as well as can be expected. In fact, for a company of their size I'd go so far as to say they're punching above their weight with such a strong foundation as webOS. Financial stories have a tendency to make my brain explode, but you'd have to be insane not to recognize that Palm have a great product that has captured a significant amount of mindshare. So long as you have those fundamentals in place, success is almost guaranteed - even if it isn't world-beating. Barring a massive screw-up, Palm are going to keep pumping out devices we can all enjoy for years to come. Which is all that should really matter to any of us, gadget fans that we are.

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It matters ... and you got the story wrong

SeldomVisitor @ 10/1/2009 7:52:47 AM # Q
"Sell-in" is sales by Palm to those who sell to others.

"Sell-through" has ALWAYS been taken to mean sales to end consumers, apparently by everyone EXCEPT Palm.

That analyst revealed that Palm was counting as sell-through not JUST sales to end consumers, but also sales by those entities to others BESIDES end consumers.

Palm issued a statement that agreed with that revelation. (note, some places like Precentral misunderstood what Palm said in their statement and blogged about it incorrectly).

Is this important?

Yes.

We have read many an article, words out of Palm, analyses from analysts, and plain cold commentary on sites liek this that have been discussing sell-through numbers as if the end consumers had the device in their hot little hands.

NOW we know these were ALL incorrect.

In fact, there is "sold-through" inventory sitting on retailers' or distributors' shelves that has yet to be sold. That unsold inventory can seriously affect how many more devices Palm can sell-IN.

For those who follow and comment on the viability of Palm this is important indeed. Before we read that the "vast majority" of sell-through was Pres - now we know that that "sell-through" could simply mean "Sold to another retailer". THAT'S an important distinction.


RE: It matters ... and you got the story wrong
Tim Carroll @ 10/1/2009 8:06:28 AM # Q
i ain't going to argue. like i said, financial stuff makes my head explode. and it's 1am here so i may well have gotten stuff wrong. fortunately we have comments sections so helpful folks like you can blast me, SV. :P

bed for Tim now.

RE: It matters ... and you got the story wrong
jca666us @ 10/1/2009 8:29:48 AM # M Q
11 weeks worth of inventory? The Pre is tanking.

You're not going to argue Sv's logic bc you need bed?

Why am I not surprised - Tim, when is Palm going to enable iTunes syncing?

I thought Palm had the USB-IF right were they wanted them - lol!!!


RE: It matters ... and you got the story wrong
rmhurdman @ 10/1/2009 9:04:34 AM # Q
I think what really matters is that Palm doesn't mind lying to investors. Not a great attribute, when you're thinking of investing in a company, especially for the long term. (I say "you", because I've never considered investing in this den-of-thieves).

Short sale, anyone?

RE: It matters ... and you got the story wrong
SeldomVisitor @ 10/1/2009 9:06:20 AM # Q
I think "lying" may be a little strong here.

Instead, I think it's pretty obvious that "Palm doesn't mind not clearing up a misunderstanding" might be more correct.

RE: It matters ... and you got the story wrong
rmhurdman @ 10/1/2009 10:30:42 AM # Q
They did "clear it up" by agreeing with the revelation. But at the same time, they're using an industry-standard term to mean something different from everyone else in the industry. Something that makes them look better than they are. Call that what you will...
RE: It matters ... and you got the story wrong
SeldomVisitor @ 10/1/2009 10:38:10 AM # Q
I cannot disagree with you.

I just wouldn't say it myself.

Giggle.

RE: It matters ... and you got the story wrong
Tim Carroll @ 10/1/2009 1:42:09 PM # Q
Hang on SV. you say:

We have read many an article, words out of Palm, analyses from analysts, and plain cold commentary on sites liek this that have been discussing sell-through numbers as if the end consumers had the device in their hot little hands.

yet I wrote...

Rather than counting the number of smartphones sold to end-users, Palm instead counts how many have been bought by their carrier partners - a number which also includes those devices that are sitting in retail inventory channels, waiting to be snapped up (or not) by customers.

Erm. So how did I get that wrong...?

RE: It matters ... and you got the story wrong
SeldomVisitor @ 10/1/2009 2:51:46 PM # Q
Devices bought "by carrier partners" are ==sell-in==; they are devices bought FROM Palm for resale to others.

Devices sold by those "carrier partners" (and others, of course) are what Palm is counting "sell-through" - those devices are NOT necessarily going into end consumer hands but could be going to OTHER venues that sell to others. Just about everyone in the known universe, of course, considers the term "sell-through" to STRICTLY mean sales to end consumers and, when we bandy about sell-through numbers amid myriad discussions, we're talking about adoption by end consumers, not some retailer like BestBuy.

But no more! Now we know the game Palm is playing with the numbers!

[Your words were simply wrong - see your own quotes that I am replying to.]

RE: It matters ... and you got the story wrong
abosco @ 10/1/2009 7:43:02 PM # M Q
I'm an engineer, I like equations:

Sell In = Sell Through + Inventory

As a result of Palm's secrecy, we don't know the size of the inventory. Let's face it, in order for Palm to pull an awkward stunt like this, it means they're masking worse-than-expected results. Similar to when they couldn't give a straight answer on how many Pres sold.

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'The End Of Palm is nigh'

twrock @ 10/1/2009 9:08:44 AM # Q
They might be right this time.

They might have been right last time.

Or the time before that.

Or the time before that.

But if they keep saying it over and over and over and over again, they might be right eventually. So who knows? They might be right this time.

Or not.......

Hey Palm! Where's my PDA with Wifi and phone capabilities?

RE: 'The End Of Palm is nigh'
philpalm @ 10/1/2009 9:23:58 AM # Q
They might be right !00% or wrong 100%. Or it might be fractions of right or wrong, or it might represent a nebulous answer that could never be proven right or wrong. Such nebulous statements makes me see stars.....

I appreciate Tim for staying on top of the story. Being a writer is a poor paying job, hopefully Palm is not paying him to write under the table. (future disclosures coming?)

Since the Apple fanboys hate to disclose their partiality all the time, no wonder a lot of people are cynical. Me I sold out to a used IPhone. The disclosure that a non-contract Pre is not usuable either will make me more of a hacker or praying for a true WebOS PDA.

Oh yeah I am hoping that Palm sells a lot of WebOS devices. Competition makes all smart phones and PDAs better.

RE: 'The End Of Palm is nigh'
Gekko @ 10/1/2009 10:35:09 AM # Q

i wanted to love the Pre but it's just not a good product. software, hardware, GUI, sync, build quality is all just awful.
RE: 'The End Of Palm is nigh'
Tim Carroll @ 10/1/2009 1:49:13 PM # Q
I appreciate Tim for staying on top of the story. Being a writer is a poor paying job, hopefully Palm is not paying him to write under the table. (future disclosures coming?)

HA! Rest easy philpalm, Palm aren't paying me anything. In fact I think they kinda hate me for harassing them with annoying questions like "WTF is up with your GSM marketing strategy? are you nuts?" (paraphrased)

PIC isn't my full-time job. It's just for fun. :)

RE: 'The End Of Palm is nigh'
abosco @ 10/1/2009 1:49:30 PM # M Q
Inventory dumping is something that Palm has been accused of in the past, usually accompanied by dire predictions of the company's Imminent Doom. It hasn't happened yet...

You're correct, it hasn't happened yet, but look at why. Merger and acquisition smoke and mirror nonsense with PalmOne and PalmSource. M&A smoke and mirror nonsense with Handspring. Reverse stock split to prevent delisting. Three separate cash infusions from Elevation Partners. And then another stock offering.

This ship has been taking on water for about 8 years now. It hasn't made any real money in all that time.

RE: 'The End Of Palm is nigh'
Gekko @ 10/1/2009 1:59:10 PM # Q

the Pre isn't even close to being the device or savior that Ruby and McNamee promised. too little too late.

RE: 'The End Of Palm is nigh'
Tim Carroll @ 10/1/2009 2:16:54 PM # Q
bosco:
This ship has been taking on water for about 8 years now...

Look, maybe the doomsayers are right. But as far as I'm concerned their credibility went out the window a long time ago. They've cried "wolf!" way too often for me to find it interesting anymore. And crying it now, when Palm hasn't even completed their full international rollout, will soon be introducing a second phone and is saying they'll be cash-flow positive next year just seems ridiculous.

Gekko


i wanted to love the Pre but it's just not a good product. software, hardware, GUI, sync, build quality is all just awful.

Keep trying mate, someone's going to take the bait I'm sure. :P

RE: 'The End Of Palm is nigh'
DarthRepublican @ 10/1/2009 2:22:32 PM # Q
Gekko wrote:

the Pre isn't even close to being the device or savior that Ruby and McNamee promised. too little too late.

And neither was the m100. Or the m500. Or the Tungsten T. Or the Tungsten T5. Or the Treo 650. Or the LifeDrive. Or the Centro. Palm has been putting out "too little, too late" devices for a decade and their time never seems to run out. Maybe someday it will. And then all the naysayers can dance over its grave and proudly proclaim that they had warned them throughout almost its entire lifetime.
Palm Apologist
Shouting down the PIC Faithful Since 2009
Screw convergence
Palm III->Visor Deluxe->Visor Platinum->Visor Prism->Tungsten E->Palm LifeDrive->Palm TX->Palm Pre
Visor Pro+VisorPhone->Treo 180g->Treo 270->Treo 600->Treo 680->T-Mobile G1->Palm Pre
http://mind-grapes.blogspot.com/

RE: 'The End Of Palm is nigh'
SeldomVisitor @ 10/1/2009 2:55:40 PM # Q
I, too, could survive for years by selling shares of myself for hundreds of millions of dollars and otherwise doing nothing useful.

Sugar Daddies are nice.

RE: 'The End Of Palm is nigh'
twrock @ 10/1/2009 10:08:11 PM # Q
When was the last time any of these brilliant prognosticators came back after being wrong and actually said the words, "I was wrong."?

This game is not only fun, it's easy. Here, let me have a stab at it.

1. I predict with absolute certainty that not one of these guys will be be saying "I was wrong" in any of their future articles or posts even if Palm keeps chugging right along or even starts to improve their financial situation.
2. I can also predict with absolute certainty that if somehow Palm completely collapses in the next six months to a year, every one of them will be crowing loudly, "I told you so."

See there? That wasn't so hard. I'm a brilliant prognosticator myself!

Hey Palm! Where's my PDA with Wifi and phone capabilities?

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Wall of VooDoo (or disinformation)...

surfmaniac @ 10/1/2009 2:07:07 PM # Q
See you at 30, suckers.
RE: Wall of VooDoo (or disinformation)...
sbono13 @ 10/1/2009 5:44:16 PM # Q
Much ado about nothing. Everyone assumed "sell-through" meant sell-all-the-way-through to end users, but Palm doesn't have access to that information, so they give the next best thing: sell-through-out-of carriers. The difference is negligible, and I suspect that's why Palm has never bothered to draw the distinction. The Best Buys and the Radioshacks of the world keep very lean inventories.


RE: Wall of VooDoo (or disinformation)...
CFreymarc @ 10/2/2009 12:02:11 AM # Q
This reminds me when Microsoft was only quoting sell-thru numbers for WinCE devices about five years ago. One question that was never answered is "What is your return rate?" I suspect that the same is for Palm. Anyone got data from Sprint store employees about this?
RE: Wall of VooDoo (or disinformation)...
SeldomVisitor @ 10/2/2009 3:54:49 AM # Q
Pardon - but this actually IS a Big Deal.

Because BestBuy and RadioShack, of course, are not the only venues that Sprint sells to.

What if they also sell to a redistributor?

The fact that Palm didn't bother to reveal what they meant by sell-through, nor when they STARTED the use of that particular definition, should be of concern to every shareholder and more.

RE: Wall of VooDoo (or disinformation)...
sbono13 @ 10/2/2009 9:39:54 AM # Q
"The fact that Palm didn't bother to reveal what they meant by sell-through, nor when they STARTED the use of that particular definition, should be of concern to every shareholder and more."

They've used the same consistent definition of sell-through for the past 4 years, and they've been revealing it in their SEC filings the whole time. Is it exact? No. Is it close enough? Palm seems to think so. They rely on it for business, not just bragging rights-- they use it for forecasting demand, supply chain management, etc.

RE: Wall of VooDoo (or disinformation)...
SeldomVisitor @ 10/2/2009 9:45:57 AM # Q
You are TOTALLY incorrect.

I'm surprised you would say such a thing - no kidding - Palm has NEVER said in any manner (until just a few days ago):

== "Sell-through isn't just to end consumers, it's simply sales by those we sell to"

And I invite you to find ONE definition of sell-through in ANY SEC filing by Palm.

No kidding - when this hit the fan I checked the last N 10K and 10Q filings myself.

This remains a BIG DEAL.

RE: Wall of VooDoo (or disinformation)...
sbono13 @ 10/2/2009 10:10:13 AM # Q
Weren't you the Hengeem that posted this on the Yahoo message board (found in Palm's annual reports in 2006,07,08,09):

"== ...We rely on wireless carriers, distributors, retailers and
== resellers to provide us with timely and accurate information
== about their inventory levels as well as sell-through of
== products purchased from us..."

That defines what Palm considers sell-through. Sell-in is when they ship to a customer, sell-through is when purchased unit is sold by that customer. Simple, straightforward, consistent. I appreciate your attention to detail, but let's focus on the forest, not the trees. Consider Sprint's customers and contemplate why they would buy more stock then they intend to sell. Just because it *could* happen doesn't make a conspiracy likely.

RE: Wall of VooDoo (or disinformation)...
SeldomVisitor @ 10/2/2009 10:19:54 AM # Q
You are sayign nothing. Palm =just= revealed that for THEM "sell-through" does indeed mean "sales by those to whom we have sold" rather than the widespread belief by nonPalm entities from analysts to media to investors to mere observers that "sell-through" means "sales by those to whom we sell to end consumers".

The difference is radical and calls into question all SORTS of OTHER statistics bandied about, in particular "inventory", "marketshare", "marketshare increase", "acceptance in the marketplace", "adoption by the Fat Middle", etc etc etc.

Now that we know Sprint could simply have been selling devices to other distributors (even worse than merely selling to retailers) all SORTS of bogosity arise about words spoken by Palm at earnings conferences, investor conferences, CES, whereever,

Sure, NOW we know never again to discuss the NOW-known-to-be-useless number known as "sell-through" but we for SURE didn't before. Need ANYONE remind ANYONE about "vast majority of sell-in and sell-through were Pres"?

RE: Wall of VooDoo (or disinformation)...
sbono13 @ 10/2/2009 10:39:29 AM # Q
Well, whatever floats your boat. It doesn't bother me as either an investor or a consumer. I don't think the implications are as dire as you claim. No 3rd party makes any marketshare estimates based on a manufacturer's reported sell-through, because guess what? No other manufacturer reports sell-through. They either calculate based on reported sell-in, or they do their own independent research on end-user purchases.
RE: Wall of VooDoo (or disinformation)...
surfmaniac @ 10/2/2009 1:56:38 PM # Q
Sbono, don't get yourself sucked into this inane debate... these are the same geniuses who were calling PALM dead back at 2 bucks a share (or even less, actually) in Jan. As the old saw goes, Some do (put their $$$ where their mouths are) and some teach (or stay on the beach watching and wishing, as we say here.)


malibu surfer

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