Palm Shares Slump as Sales Forecast Trails Analysts’ Estimates
March 19 (Bloomberg) — Palm Inc., creator of the Pre smartphone, dropped as much as 17 percent in early U.S. trading after forecasting sales this quarter that were less than half of analysts’ estimates.
Revenue in the period ending in May will be less than $150 million, Chief Financial Officer Doug Jeffries said yesterday on Palm’s third-quarter conference call, compared with the $300 million average of estimates compiled by Bloomberg. The company also reported its 11th straight quarterly loss.
Palm started selling updated versions of its Pre and Pixi smartphones at Verizon Wireless in January, competing with Research In Motion Ltd.’s BlackBerry and Motorola Inc.’s Droid, which runs on Google Inc.’s Android software. In the quarter ended in January, Android’s share of the U.S. smartphone market more than doubled to 7.1 percent, while Palm’s fell to 5.7 percent from 7.8 percent, according to researcher ComScore Inc.
“Our recent underperformance has been extremely disappointing to me personally and the entire Palm team,” Chief Executive Officer Jon Rubinstein said yesterday on a conference call. “We’re very realistic about our near-term challenges, but the issues we’re facing are far from insurmountable.”
Palm’s fiscal third-quarter loss narrowed to $18.5 million, or 13 cents a share, from $95 million, or 89 cents, a year earlier. Palm told investors last month that sales this year will be “well below” a previous forecast. Revenue in the third quarter more than tripled to $349.9 million.
Shares Slide
The company’s shares, after tripling last year, have lost more than half of their value in the past two months amid disappointing sales through Verizon Wireless. They dropped as much as 94 cents to $4.71 in trading before U.S. markets opened.
“They’ve got one more shot here to get it right,” said Matthew Thornton, an analyst at Avian Securities LLC in Boston, who has a “neutral” rating on the shares and doesn’t own them. “They have to come back with a more effective branding push to get the buzz out there.”
Rubinstein said Palm’s efforts to train employees at stores have been inadequate and the company is “aggressively” putting more resources into training sales representatives.
“It became clear to us shortly after the Verizon launch that our training efforts have been insufficient,” he said.
Excluding some items, Sunnyvale, California-based Palm recorded a loss of 61 cents a share in the quarter ended Feb. 26, compared with the 42-cent average estimate of analysts surveyed by Bloomberg.
Operating System
Rubinstein is trying to revive the company with a new operating system called WebOS, which runs on the Pre and Pixi. Palm introduced the Pre through Sprint Nextel Corp. in June. Verizon became the second U.S. mobile operator to carry the phones, and AT&T Inc. said in January that it will start selling WebOS devices in the first half of 2010.
Smartphone shipments increased 23 percent to 960,000 in the period from the second quarter. Sales, including deferred revenue, totaled $366 million, topping the $316 million estimated by analysts.
Promotional costs for new phones contributed to a 32 percent jump in sales and marketing expenses to $98 million from the second quarter. The company’s cash, cash equivalents and short-term investment rose by almost $2 million to $591.9 million.
[BusinessWeek]
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