Palm blamed its second quarter shortfall on the delay of the Treo 750, but analysts reckon management is merely using the device as an excuse for poor execution.
On the surface, the Treo 750 delay doesn't seem all that bad--after all it takes time to get devices certified with carriers. The problem: Palm's product delays have become habitual.
Merrill Lynch panned Palm and downgraded the stock to a neutral. Analyst Vivek Arya said in a research note:
"Palm cited product certification delays, and we believe the major reason was a complete miss (in 2Q) of Treo 750 shipments and a 2 week delay in Treo 680 shipments, both to Cingular. The magnitude of the miss also indicates possible price pressure on Palm's Treo 700p/w. We note Palm's F2Q07 miss follows F1Q07 warning due to price competition from Motorola's Q smartphone, and F4Q06 miss due to delayed launch of European Treo 750v smartphone."
Arya's mention of price competition shouldn't be underestimated. As I noted last night I was going to get a Treo until I noticed Verizon Wireless was pitching Motorola's Q for $99 with a $100 mail-in rebate. Count me in the "prosumer" camp that doesn't want to create PowerPoints on a handheld (or anywhere for that matter), but likes the data access a smartphone provides. I have nothing against the Treo other than the price.
In other words, price matters especially when the smartphone market is way crowded.
Piper Jaffray analyst Quan Zhang analyzes the channel:
"We believe the Cingular channel could offer a good competitive analysis this holiday season, and Palm's delay in certifying the 750v could adversely impact its market share at Cingular during this seasonally strong period. During the month of December we expect Cingular to offer more than 10 smartphones including the new Treo 750 (delayed) and Treo 680, the HSDPA Samsung BlackJack, the HSDPA (HTC) Cingular 8525, Cingular 3125, Nokia E62, BlackBerry Pearl, BlackBerry 8700, and potentially other new smartphone products. Compared to prior years, where BlackBerry products and Treos represented the majority of smartphone products, it is evident the smartphone competitive landscape has changed."
The big question is whether Palm's management can navigate this new environment. So far, the outlook isn't promising. Step one for the rehab of Palm's management team is to stop screwing up product launches--shouldn't a company like Palm know that carrier product certifications can be delayed? Jonathan Hoopes, an analyst at ThinkEquity who is actually upbeat on Palm's prospects, says "management must do better." Management better start soon because the jeers are getting louder by the minute.