Palm Q4 FY08 Conference Call Highlights

Posted By: Ryan Kairer Thursday, June 26, 2008 3:32:45 PM

Palm IncPalm Inc. announced their fourth consecutive quarterly loss today. The company posted a fourth quarter loss of $43.4 million. In its conference call Palm blamed the loss on lower average margins, its continued transition and declining sales of its aging Windows Mobile product line. All the news was not negative and increasing Centro momentum drove significant gains in market share and record smartphone sell through for Palm. The company also announced it will be refreshing its entire Windows Mobile line utilizing Microsoft's latest offerings over the next few months.

Palm CEO Ed Colligan started off the call talking about the continuing transformation of the company. He remarked that while Palm has gone through another difficult quarter financially, he has "never felt more enthusiastic about our product pipeline and ability to get back on the right track."

He went on to say that strong sales of the Palm Centro were driving the record smartphone sell through. Palm sold 968,000 smartphones over the quarter up 19% from the previous quarter. However, the lower average selling price and slimmer margins on the Centro combined with slowing Windows Mobile smartphone and handheld sales, resulted in reduced revenue of $296 million.

Centro is a hit slideThe usual round of praise was given to Palm's restructuring efforts. Ed highlighted two recent major hires to the Palm development team. Mike Abbot comes from Microsoft where he was a key architect of the team developing .net services. He is the new SVP of Application Software & Services and is tasked with driving integration between network services and on-device applications for a more compelling web experience. Way Ting comes from Silicon Graphics where he spent several years developing SG's core OS layers. As the new SVP of System Software he is tasked with insuring the Palm's core OS elements are world-class and are delivered on time.

During the quarter Palm's revenue mix was 90% smartphones and 10% handhelds. 83% of revenue was from the US and 17% international. Revenue was $296.2 million with a 25.2% Gross Margin. 913,000 smartphones were shipped on 958k sell-trhough with an average selling price of $288. Handheld revenue came in at $30.6 million on 159,000 units shipped with 185k unit sell-through. Handheld sales have been steadily declining for years now and were down 20% from the last quarter.

New Windows Mobile Products

Numerous mentions were made to Palms aging Windows Mobile line. Colligan announced some more details during the call stating that the whole Windows Mobile line would be "rebuilt" over the next few months and through the end of the year. Colligan said the new products will deliver a number of key advancements including 3G wireless radios, integrated WiFi and GPS capabilities in a "fantastic design."

When asked later in the Q&A session about possible carrier exclusives on the new WIndows Mobile introductions Colligan stated that in general the new products will be widely available out the gate. As opposed to the usual carrier exclusives on new introductions in the past, he said these will not be exclusive to any region at launch.

The latest rumors and leaks have shown two new designs in the pipeline. The Treo 800w is a CDMA unit, expected to be launched on Sprint in the US possibly as soon as July 13th. Another sleeker GSM flavored model likely called the Treo 850 has been shown sporting a slimmer profile and more Centro like design.

Update on Palm OS Nova

Colligan also touched on the new Palm system software which has been ongoing for some time now. He again asserted that the new OS, code named Nova, will restore Palm's design and innovation leadership position. Again, very little specific detail other than the usual enthusiastic adjectives of positive optimism were given. Colligan restated his refrain that the new software combined with the new "game changing hardware" designed for it will usher in a "new era for Palm."

When pressed for more specify on the timing and potential for delays with the new OS Colligan would only reiterate that Palm plans to wrap up work on the new system software by the end of this calendar year with new products based on it debuting in early 2009. He also made reference that there would be some sort of developer announcement or further detailing around that time.

The following audio clip is from Colligan's response about what milestones can we expect to track progress on the next generation operating system.

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Colligan's closed mouth

mikecane @ 6/26/2008 7:11:35 PM # Q
Is what I advocated here:
http://mikecane.wordpress.com/2007/02/10/hey-nokia-this-is-how-quality-works/

On the one hand, he's right.

On the other hand, I think both his hands are empty.

RE: Colligan's closed mouth
freakout @ 6/26/2008 8:10:21 PM # Q
Keeping mum on the release date (beyond the vague "2009" we've been getting) is all well and good, but it'd be nice to know something about it. Anything would be good, at this point...
RE: Colligan's closed mouth
PacManFoo @ 6/26/2008 8:35:00 PM # Q
If a tree falls and no ones there does it make a sound. That's what I see for Palm's future. How many have lost their giveadamn for Palm?

The last known classic PDA user.
I've recently upgrade from a Palm TX to a Newton MP2000!
RE: Colligan's closed mouth
heavyduty @ 6/27/2008 4:10:20 AM # Q
At this point they should really throw people a bone regarding Nova, just to give potential buyers a reason/hope to hang on. But they're behaving as if they are on top of the world and can afford this kind of secrecy which borders on arrogance.

Way to go Palm, you just keep repeating the same mistakes over and again; even you *are* actually doing something right this time you're certainly don't have anything to show for it, which is the story of the last 6 years: nothing worthwhile to show. Way to go.

Palm Vx (a classic) -> Palm 505 (*yawn*) -> Dell Axim (slooow...) -> Palm TE (great) -> Qtek 9090 (great idea, lousy platform) -> Nokia 6630 (a toy) -> iMate SP3i (not bad) -> Nokia 9300 (can't sync notes!!) -> Treo 650 (awesome) -> hw6915 (almost perfect)

RE: Colligan's closed mouth
SeldomVisitor @ 6/27/2008 8:15:42 AM # Q
Closed mouth?

Nah.

He said on schedule to release what they said they were going to release and have products out within first half of 2009.

No, he did NOT say what they had said they were going to release, nor did he define "products".

One interesting closed-mouth thing he didn't say was in answer to "Have you sent a Nova beta out to developers yet" was "I'm not going to say". IMHO, that's a solid "No".


RE: Colligan's closed mouth
dagwud @ 6/27/2008 10:59:18 AM # Q
@pacmanfoo: Depends on your definition of "sound." Technically, the falling tree makes vibrations even if there are no ears around to convert it to sound. And that may be the perfect analogy.

After playing with our friends' iPhones and seeing the news releases about new software for Android, how many of us are going to be staring at our nifty, new non-Palm devices and miss the release entirely?

I haven't lost my giveadamn yet, but it might easily get misplaced when the Android phones come out.

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

RE: Colligan's closed mouth
mikecane @ 6/27/2008 1:37:31 PM # Q
Let's not forget they are beta testing an "innovative" device for people who need need need email.
http://www.palminfocenter.com/news/7742/palm-sends-out-beta-test-invites-for-new-device/

I still think that's the Celio Redfly. Probably announced as a bundle with the 800w.

Reply to this comment

A million a quarter ain't bad

freakout @ 6/26/2008 9:15:26 PM # Q
...well, nearly a million, anyway. Be nice if they were making some money off it, though. The real question is, can they keep up / increase that pace until Nova is ready?

So long as Centro stays hot and the new WinMob units don't fall completely flat, should be do-able...

RE: A million a quarter ain't bad
hkklife @ 6/26/2008 9:56:49 PM # Q
Of course the Centro will stay hot! After the PDAs are finally put out of their misery and euthanized in the next 2-4 months and the POS Treos are artifically neutered in favor of WM Treos, we'll have no device to turn to BUT the Centro!

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: A million a quarter ain't bad
SeldomVisitor @ 6/27/2008 8:22:59 AM # Q
> ...So long as Centro stays hot...

and

> Of course the Centro will stay hot!...

They were asked exactly that question:

== "...Michael Walkley - Piper Jaffray
==
== Great, thanks. Just a little more color in the Centro
== sell-through. I think last quarter you were sharing a
== run-rate per week. Could you update that now that you
== are at multiple carriers, just to help us in thinking
== about modeling?
==
== Edward T. Colligan
==
== Well, I mean, it's clearly increased. You know, we are
== seeing - during the quarter we saw the full benefit of
== AT&T coming online, along with Centro and as we'd
== mentioned last quarter, it was accelerating through the
== quarter. We just don't want to get into specifics of
== sell-through at this point in time..."

That latter sentence is a giggle since they went out of their way last time to tout their 30,000 Centros/week number - VERY specific.

IMHO that means the numbers aren't beneficial to Palm - either declining NOW or showing essentially zero Treo sales. Or both.

== "...Needless to say, you know, the sell-through - when
== you look at our sell-through, we had a nice up-tick,
== 19% quarter over quarter and the vast majority, if not
== all of that, was the Centro product..."

Note that "quarter over quarter" is not "week by week" - time
IS of the essence as they say.

RE: A million a quarter ain't bad
PacManFoo @ 6/27/2008 10:06:54 AM # Q
Of course the Centro will stay "Hot".

Here is a -secret- insider Palm document I have uncovered: http://tinyurl.com/yovjnw

The last known classic PDA user.
I've recently upgraded from a Palm TX to a Newton MP2000!
RE: A million a quarter ain't bad
heavyduty @ 6/27/2008 10:25:42 AM # Q
LOL!

Palm Vx (a classic) -> Palm 505 (*yawn*) -> Dell Axim (slooow...) -> Palm TE (great) -> Qtek 9090 (great idea, lousy platform) -> Nokia 6630 (a toy) -> iMate SP3i (not bad) -> Nokia 9300 (can't sync notes!!) -> Treo 650 (awesome) -> hw6915 (almost perfect) -> Nokia E51 (un/impressive) -> Touch Enhanced (nice!)
RE: A million a quarter ain't bad
cstamper @ 6/27/2008 10:27:44 AM # Q
Very funny...

But if it works, good for them... Right?

http://tinyurl.com/2ooncg

RE: A million a quarter ain't bad
nastebu @ 6/27/2008 10:56:54 AM # Q
This Centro 1 million... terribly close to the classic technique of selling at a loss and making up for it in volume.

Palm's got to be concerned that their $99 Centro is going up against a $200 iphone (at least in the US). That's not the same customer demographic, but it's close enough to pinch.

RE: A million a quarter ain't bad
SeldomVisitor @ 6/27/2008 11:34:28 AM # Q
Nah - their 800w will be going up against the iPhone 3G.

And within days of each other.

With the iPhone released FIRST.

Great move.

RE: A million a quarter ain't bad
LiveFaith @ 6/27/2008 4:27:06 PM # Q
Forget the iPhone for a moment. It's the slew of sleek and powerful Blackberry's that are putting a beatdown on Palm. Outside of the touchscreen and software lib Palm has very few reasons to make buyers pull the trigger at the ATT store. I'm not sure how many even know about software or see the need for touch panels + keyboards.

It's like Slick vs Brick and we're losin'.

Pat Horne

RE: A million a quarter ain't bad
Surur @ 6/28/2008 8:21:13 PM # Q
Palm has always sold around 1 million units of everything combined per quarter. It used to be moving the balance from PDA's to smartphones was a net possitive, despite stagnant total unit sales, due to the higher margins for smartphones, but with the centro that paradigm went out of the window.

About the million number, look here. This is the total of smartphone+pda sales since 2004

Q204 ………… 1,400,000
Q304 ………… 1,303,000
Q404 ………… 960,000
Q105 ………… 945,000
Q205 ………… 1,082,000
Q305 ………… 1,279,000
Q405 ………… 1,120,000
Q106 ………… 977,000
Q206 ………… 1,143,000
Q306 ………… 1,334,000
Q406 ………… 1,014,000
Q107 ………… 1,059,000
Q207 ………… 1,117,000
Q307 ………… 1,194,000
q407 ………… 1,064,000
q108 ………… 1,014,000
q208 ………… 1,014,000
q308 ………… 1,014,000
q408 ………… 1,072,000


The average is 1,110,789 with a standard deviation of only 133,248. This means Palm is so predictable shipment-wise that you could say with 66% certainty they would sell between 850,000 and 1.4 million in a quarter, and 95% certainty they wont sell more than 1.5 million in 1 quarter.

RE: A million a quarter ain't bad
SeldomVisitor @ 6/29/2008 6:50:59 AM # Q
Those numbers are cool but be careful not to confuse sell-in with sell-through. the "One Million Centros Sold" fluff is talking sell-through numbers while the ASP and revenues and etc etc etc are talking sell-in numbers.

Please correct me if I am wrong but Palm/Handspring has not revealed EITHER sell-in or sell-through consistently from quarter to quarter. They started off with the TREO 180 by revealing both but clammed up pretty fast when the Treo 270 came out. Then they varied with the wind revealing one or the other. For a number of consecutive months they revealed sell-through numbers in a nice graph until that graph started leveling off, then stopped.

But I believe for a few years now BOTH numbers have not been simultaneously released by Palm in any consistent manner.

RE: A million a quarter ain't bad
Surur @ 6/29/2008 8:50:05 AM # Q
Yes, you are right, and even recently what they called shipments in one month they call sell through in the next. The three most recent months were particularly bad in this.

I think the numbers prove the general point though - selling 1 million of everything is par for the course for Palm - just because is now smartphones does not actually mean anything.

Surur

RE: A million a quarter ain't bad
sbono13 @ 7/1/2008 1:02:21 PM # Q
"shipments" always means sell-in. palm has provided both sell-through and shipments in their quarterly conference calls for about 12 straight quarters. in fact, they've always provided sell-in, then started also giving out sell-through to assuage inventory worries.

Reply to this comment

DOOM, DOOM, DUMB

TooMuch @ 6/27/2008 5:37:01 PM # Q
2 million Centros is apparently a doom diagnosis for most comments here. Every time they speak, people here seems to whine. Bob Newhart has two words for you. Watch this. http://youtube.com/watch?v=BYLMTvxOaeE



RE: DOOM, DOOM, DUMB, DUMBER
SeldomVisitor @ 6/27/2008 5:46:24 PM # Q
If it costs me 10¢ to make and market a Popsie Poopsie and I sell 2 million of them for $180,000, does that excite you over my future business prospects?


RE: DOOM, DOOM, DUMB, DUMBER and DOUBLE DOOMER
TooMuch @ 6/27/2008 6:07:14 PM # Q
Cool down. Palm isn't doing anything other than what THEY SAID THEY WERE GOING TO DO over the last few months. They delivered a very successful Centro to market. Market share is up and still growing.

NEXT (summer/fall)...New Windows Mobile Treos. (increasing revenue)

FOLLOWING (end of year)...New OS platorm. (showing potential for more revenue)

THEN (by end of first quarter '09)...New hardware running new OS. (delivering revenue lines)

If they don't deliver on this, you can whine then. Until then. STOP IT! They are doing just what they said. (If my memory serves me right, you predicted that the Centro was ugly and would fail.) If you don't like it, you can sell now. But whining about revenue when EVERYONE KNEW that any success would be tough to come by dating back to the debacle of last summer is just crying last year's tears.

Finally, J. P. Morgan knows something about what's coming. Be patient or get off the bus.

RE: DOOM, DOOM, DUMB
LiveFaith @ 6/27/2008 9:05:46 PM # Q
I don't know Seldom, sounds like your marketing dept is doing a pretty good job. If you actually deliver something compelling, watch out!

Better load that PALM wagon. Oops they changed the ticker didden they.

Pat Horne

RE: DOOM, DOOM, DUMB
SeldomVisitor @ 6/28/2008 7:59:07 AM # Q
> ...They are doing just what they said...

No, actually they're doing worse than they said.

RE: DOOM, DOOM, DUMB
TooMuch @ 6/28/2008 8:51:43 AM # Q
SV, your pessimism is getting the best of you. Palm never said they would sell almost 2 million Centros in 6 months. They never predicted that they would gain back 14% market share with it. Etc. These are things that you said they could never do with the Centro.

Again, I suggest that you sell now and move on. Go find something else to incessantly rant about. ;)

RE: DOOM, DOOM, DUMB
LiveFaith @ 6/28/2008 9:18:08 AM # Q
TM,

I hope your not loaded up in this position. Not only don't put all your eggs ... you would be wise to keep very few here IMO. A lot of the leadership of this company has taken them into a horrible downward spiral in the past 5 years. Marketshare is a pretty horrifying subject with Palm if you look at the 5-7yr model. Unless they have had a major league culture change, then I would just run for the hills.

Just my $.02

Pat Horne

RE: DOOM, DOOM, DUMB
TooMuch @ 6/28/2008 1:35:24 PM # Q
Thanks for the concern LV. Rest assured that I am NOT loaded up on Palm at this point. However, I am encouraged by some recent broker assessment that Palm is actually ramping up some promise. One very reputable firm thinks Palm has the potential to at least triple its value in the next 12 months. Somebody has eyes on something here.

RE: DOOM, DOOM, DUMB
TooMuch @ 6/28/2008 1:36:09 PM # Q
Pardon the typo, I meant LF not LV

Reply to this comment

centro is the best palm yet

Gekko @ 6/29/2008 4:38:06 PM # Q
it's been one week with the centro and I love this little thing. I'm not sure how profitable it is for palm, but this is a great little device. tiny, light, fast, sleek, light, inexpensive, and powerful. bravo palm! I can do anything any blackberry or iphone user can do and I can do it faster, cheaper, and better.

RE: centro is the best palm yet
SeldomVisitor @ 6/29/2008 7:20:35 PM # Q
It is the latest Palm device, no?

Shouldn't it be the best yet?

RE: centro is the best palm yet
mikecane @ 6/29/2008 8:20:08 PM # Q
>>>any blackberry or iphone user can do

Except use WiFi

Except have a *real* web browser

Except have a REAL screen

CENTRO: For Those Who Can't Afford The Very Best

RE: centro is the best palm yet
Gekko @ 7/10/2008 10:13:00 AM # Q
>It is the latest Palm device, no? Shouldn't it be the best yet?


many here vociferously disagree that it is not the best, hence my pronouncement.



Reply to this comment

The Centro is for....

Doo @ 6/29/2008 9:11:44 PM # Q
Here's the real deal with the Centro.

Years ago Palm was the name in hand held computing. Klinex was to tissues as Palm was to hand-helds.

That is still true to a point today.

Then Centro is getting the Palm name out there to a new generation of phone buyers. It might not make a ton of cash, but it's advertising the others are paying for. Increased market share, name recognition and a little profit to boot. Not bad.

So are the folks at Palm as dump as you make them out to be?

So now you all can flame away. It's what I've come to expect here at PIC (sad state that it is)


RE: The Centro is for....
nastebu @ 6/29/2008 11:38:29 PM # Q
the problem with this argument is there's no upgrade path. A low end device that increases market share at the expense of profits only makes sense if you can count on those users buying a more expensive device down the line. In the case of the centro, there's nothing better (really) in Palm's line up and so most users will upgrade to Apple or RIM.

Maybe Nova changes that equation, but that's a BIG leap of faith.

RE: The Centro is for....
Doo @ 6/30/2008 12:59:16 AM # Q
There is no upgrade path now. But in a years time, when the owners of the Centro get to the end of thier contracts, Nova devices should be out. I like the Centro for it's stop gap placement.

Of course saying nice things about Palm here could get me linched.

RE: The Centro is for....
mikecane @ 6/30/2008 3:49:44 PM # Q
>>>Of course saying nice things about Palm here could get me linched.

WTF? This is the 21st Century. We don't use crude ropes.

Now roll up your sleeve ...

RE: The Centro is for....
nastebu @ 6/30/2008 4:34:06 PM # Q
Yes a year from now Nova will be out. So will Android, iPhone rev 3, winmob 7, and who knows what else RIM and others will crank out. Fierce competition for a brand new, undebugged operating system.

Worse, Nova be starting with zero installed devices as a base for developers to sell to. The iPhone will be on, conservatively, 15-20 million devices, RIM's phones many more than that. Who knows about Android, but that can't be less than millions. It's a big stretch to expect the kind of application development that Palm has had in the past. How is Palm even going to be able to compete on price against that kind of economy of scale? Isn't Apple the biggest purchaser of flash memory in the world now?

It's not that I'm hating on Palm. It would be great to have some more use for the folder full of Palm applications and data languishing on my hard drive. It's that the situation is so grim, and the company is so catatonic, it's hard not to watch with the same sick fascination as watching a car wreck in slow motion.

RE: The Centro is for....
SeldomVisitor @ 6/30/2008 5:13:26 PM # Q
To Palm's benefit, Linux is Linux. All those developers that hit on Android can theoretically port their wares to Palm's Nova with "minimal change".

Colligan indirectly touched on that...sort of...during the earnings call:

== "...this new platform and its accessibility to the developer community..."

RE: The Centro is for....
T_W @ 6/30/2008 11:50:16 PM # Q
. All those developers that hit on Android can theoretically port their wares to Palm's Nova with "minimal change"

Not unless Palm is porting the same Java-like API and VM that Android is using (which given Palm's recent track record, is a good decision I would not expect them to make).

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