Analysts: Sales of Palm Pre have slowed, could drag down company

Analysts: Sales of Palm Pre have slowed, could drag down company

Summary: Wall Street is starting to turn on Palm, concerned that the Pre smartphone isn't selling as well as previously expected.In a note to investors, Morgan Joseph analysts Ilya Grozovsky and James Moore downgraded their rating on Palm from Hold to Sell because they believe sales of the latest smartphone has slowed significantly and will miss projections for the quarter ending August 31.

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Wall Street is starting to turn on Palm, concerned that the Pre smartphone isn't selling as well as previously expected.

In a note to investors, Morgan Joseph analysts Ilya Grozovsky and James Moore downgraded their rating on Palm from Hold to Sell because they believe sales of the latest smartphone has slowed significantly and will miss projections for the quarter ending August 31.  From the note:

Our checks have shown that Pre sales have slowed to approximately 100,000 units in July, from approximately 200,000 in June, and we believe August shipments are tracking lower than July's. This would bring Pre shipments below our previous 400,000 estimate for the F1Q10 quarter. As such, as have lowered our Pre shipment estimates to 350,000 for the August quarter. We believe that our 400,000 units estimate for Pre was a low estimate relative to Street expectations and, as a result, believe that should the company even achieve these numbers, it would be viewed as a disappointment by investors.

In addition, they expect shipments of non-Pre phones to be lower than expected, cannibalized by the Pre. And they  also lowered their sales and non-GAAP EPS estimates for the year, as well as the estimates for next year.

In addition, they also believe price cuts are inevitable as the company tries to spur sales for the holiday season. They believe it could hurt Palm's margins, which would in turn push profitability beyond management's guidance, something that the analysts are "increasingly skeptical about."

All of this and Motorola hasn't even introduced the lineup of new Android-based phones expected out later this year.

The smartphone game has really heated up and it appears that Palm is finding out the hard way that a comeback might be harder than expected.

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Topics: Mobility, Hardware, Smartphones

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87 comments
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  • Ah, nothing like leveraging one monopoly to destroy the competition!!!

    Ah, good old Apple! By leveraging its PMP / downloadable media monopoly to destroy the competition in the cell phone market, they are able to increase their profits at the expense of consumers. This is highly abusive, highly illegal, and I'm glad that anti-trust organizations are beginning to take notice.
    NonZealot
    • itunes

      you mean apple should allow palm to biggypack on the software apple
      created and streamlined over the years funded by probably 100s of
      millions of dollars and hundreds of engineer years for free? because ...
      because .. well i don't find anything rational. oh wait a minute they did
      get to use it for free most of the time (as for instance now at this very
      moment with the current version of the palm web os)

      it is quite simple: no one is bying the pre (gartner was even lower with
      their numbers as of yesterday, they said palm only sold 205.000 units
      until now and have an unbelievable high churn rate of 20%)
      bannedfromzdnetagain
    • it's M$ FUD killing Pre

      M$ FUD about Linux infringing patents is slowing Pre, since it is based on Linux.
      Linux Geek
      • That's funny :-)

        Yeah, right, end consumers aren't buying a phone because it's based on Linux. For that to be true, the person buying the phone would have to a) know it's based on Linux, b) know there is patent contention, c) believe the patent contention is likely to result in something, d) believe that actions taken due to patent infringement will somehow affect a product they already have in their hands. Every one of these is highly unlikely to be an issue to more than a tiny percentage of potential buyers, and the combination of the four makes it completely irrelevant. *rolls eyes*

        For anyone who believes patent contention is slowing Pre sales, I've got a zero-risk investment with guaranteed high returns I'd like to offer you. Oh, and a bridge to sell too.
        zeblonite
      • Where the heck did that come from?

        Its a phone. No one cares what its written on other than a few geeks. Its the look, the feel, the flow of the phone. The PRE just isn't as cool as the IPhone and isn't as productive as a good old blackberry (at least at the price-point).

        Its not a bad phone, its interface is smooth, but still not as slick as the IPhone. Without any real training, I handed my IPhone to my 6 yr old and she was able to do just about any user function on it (including adding her friend's contact info, which I discovered a day later).
        A Gray
      • You are a complete MORON

        Go troll somewhere else.
        johnmckay
      • Huh?

        That's just silly....
        Unless you're joking & making fun of those ppl who blame any & all Linux problems on FUD.
        The end-user has no idea WebOS is a Linux OS. Sprint is most likely the reason they can't sell enough.
        spo00n
    • The limitations of Palm

      The Pre is a nice phone with a inventive user interface, but that's also all that it is. Palm can play within the confines of the market as it is set up, but I think they lack the ambition to change it. They can latch onto iTunes, and try to hold on while Apple tries to shake them off, but they never thought of competing with it.

      It's not just about the phone, or its OS, but also about what can be built around it, and what it hooks into.
      Google, Microsoft and Apple all have services and projects that hook into their mobile platforms. They have ambitions that goes beyond just making a cool OS/gadget, and I think that makes them much more interesting and more likely to win in the end.
      Theli
      • Pre Limitations

        @Theli - Along the lines of your comment: We have a few people who opted for the Pre and one of the things we've encountered is that the Pre won't play the specific wav files that are produced by our VoIP system. Palm was involved in the troubleshooting, and it appears that the specific codec required for playing those files hadn't been ported over. That was a month ago or more and we are still waiting. We have a workaround (call the vm backdoor and get at it that way), but it is klutzy ... especially when the old Treo would play them without a hitch. Losing points with client management is not a good way to gain market share.
        ddgeekgrrl
    • What are you talking about?

      There is nothing in this story about Apple, nor is it about PMPs. It's
      about Palm's inability to make a product that people want to buy.

      If anyone else had posted such an off-topic response, you'd have
      reported it as spam.

      By the way, since you brought up downloadable media, I'm not sure if
      you've heard; there are companies other than Apple that will be glad to
      sell you downloadable content. Ever hear of a company called Amazon?
      msalzberg
    • How is it illegal

      for Apple to not allow the Palm Pre to sync with iTunes? Should it then also be illegal for the Pre to not be able to sync using Windows Sync?

      IF Palm wats to have the Pre sync with someting similar to iTunes, then let THEM create it, maintain the servers, pay the various music and movie companies to be able to sell or rent the media, let them pay for the electric bills to power the servers and cooling units, let THEM pay all of the other associated costs of maintaining such a site and program.

      Apple HAS EVERY RIGHT TO DENY SYNC ABILITY TO THE PALM PRE!!! They developed the program, they paid for the servers, pay for the electricity to power those servers, pay for the building or buildings to house those servers, and pay their employees to maintain said servers and buildings. All Palm is doing is leeching off of Apple. If Pre owners want to sync with iTunes, let them get iPods or iPhones.

      Face it NZ, the Pre is not the iPhone killer everyone thought it was going to be...
      athynz
      • It was illegal for MS

        [i]Should it then also be illegal for the Pre to not be able to sync using Windows Sync? [/i]

        MS got fined billions of $$$ and forced to open up their proprietary client / server protocols to competitors like SAMBA.

        Cue the double standards...
        NonZealot
        • Double standards?

          iTunes stores its data in an XML file, which is easily accessed. It is not
          locked down. Others have written software to use the iTunes data.
          Rather than spending a few minutes coding, Palm decided to spoof
          iTunes by declaring itself to be manufactured by Apple.

          Try searching for "iTunes XML."
          msalzberg
        • Uhh...Microsoft got where they are by building Agnostic systems.

          Once they became a monopoly they changed their game. Problem is...MS is a monopoly. They can't now change their game and hurt businesses built on the original model.

          Microsoft - what can we tell so you'll give us money?
          No More Microsoft Software Ever!
      • Yes...and it's certainly NOT being unable to use iTunes that hurts the PRE.

        Perhaps its the ZuneHD? Oops, not a phone. I think Palm just lost it so many years ago and they just can't get it back.

        Sad. I have owned many Palm devices. I would never get a Pre!
        No More Microsoft Software Ever!
      • itunes and Palm Pre

        So I already own an Ipod but do not like the Iphone (too big, clumsy for emailing) but like the look of the Pre. Does Apple really want to p me off?
        TKR1
        • The iTunes data...

          is stored in a file called "iTunes Music Library.xml." Palm could have
          easily written their own sync program to take advantage of this, as others
          have done. They chose not to, either because of laziness, incompetence,
          or the need for publicity, and are now whining about it.

          msalzberg
    • why sprint

      Why do the best phones keep ending up on the less popular networks? If this phone had been offered on the verizon network everyone would have one, I know I would.
      jeffk464
    • You make no sense and you are supporting Apple because you bought a MacBook

      Sorry dude - if you really feel that way then you are part of the problem.
      No More Microsoft Software Ever!
  • Where do you get this stuff?

    You're accusing Apple of being responsible for people NOT
    paying [b]less[/b] money for a device on an arguably
    superior network with less restrictive terms and more
    features? Dude, take the tinfoil hat off.

    The Pre isn't selling because it's a late arriving also-ran in
    a crappy economy. It's unfortunate for Palm (and their
    employees) that they bet the company on Jon Rubinstein
    being able to bottle lightening twice, but don't worry
    Bono's going on tour he'll be fine.
    matthew_maurice