Palm's wipeout: Revenue will be 'well below' forecasts as consumers balk

Palm's wipeout: Revenue will be 'well below' forecasts as consumers balk

Summary: Palm's smartphone recovery took a big hit as the company sharply cut its outlook for the third quarter and fiscal 2010 because "driving broad consumer adoption of Palm products is taking longer than we anticipated."

SHARE:

Updated: Palm's smartphone recovery took a big hit Thursday as the company sharply cut its outlook for the third quarter and fiscal 2010 because "driving broad consumer adoption of Palm products is taking longer than we anticipated."

How ugly is it? Palm said its third quarter revenue will be $285 million to $310 million under generally accepted accounting principles. Non-GAAP revenue will be $300 million to $320 million.

The problem: Wall Street is looking for revenue of $424.7 million.

For fiscal 2010, Palm also said its revenue will be "well below its previously forecasted range of $1.6 billion to $1.8 billion."

The issue is that Palm is being crowded out of the smartphone market by existing powerhouses---RIM and Apple---as well as resurgent players like Motorola. Meanwhile, the webOS is being swamped by Google's Android.

In a statement, Palm said "slower than expected consumer adoption of the company’s products has resulted in lower than expected order volumes from carriers and the deferral of orders to future periods."

Palm CEO Jon Rubinstein said:

Driving broad consumer adoption of Palm products is taking longer than we anticipated. Our carrier partners remain committed, and we are working closely with them to increase awareness and drive sales of our differentiated Palm products.

Get email alerts on Palm and smartphones.

Morgan Joseph analyst Ilya Grozovsky said in a research note that Palm's biggest problem was that it launched the Palm Pre Plus and Pixi Plus on Jan. 25 and had little runway to get penetration at Verizon Wireless. Palm needed a home run with Verizon and didn't get it.

Grozovsky wrote in a research note:

Palm launched the Palm Pre Plus and the Palm Pixi Plus on January 25 at Verizon, leaving only four months of sales before Palm's fiscal year end 2010, necessitating significant penetration at Verizon to meet management's fiscal 2010 revenue guidance, despite heavy competitive pressures from other smartphones such as the Droid and Blackberry. Our analysis assumed that Palm would need to achieve approximately 1% customer penetration at Verizon within the first 3 months in order to even come close to the low end of management's FY10 revenue guidance, and we felt that was overly optimistic. We now expect the competition to be even more challenging than we had originally anticipated for Palm in the smartphone market for 2010.

Grozovsky added that Palm is likely facing slower sales at Sprint too.

Needless to say Wall Street wasn't pleased. Here's the premarket look and shares were currently down 13 percent to about $7:

Add it up and Palm shares are trading back to April 2009 levels.

Simply put, Palm is going to have to spend more money on marketing if it wants to compete in the market share game. Scale matters and as this comScore chart shows, Palm's getting crunched by Android devices.

Related: Review: Verizon Palm Pre Plus can't win back this Palm fan yet

Topics: Hardware, Banking, Enterprise Software, Mobility, Smartphones

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

98 comments
Log in or register to join the discussion
  • Get the fork.

    Palm is done.

    Rubi, you're no Steve Jobs. Hell, you're no Johnny Ives! I [b]do[/b] feel
    bad for those sucker engineers who left Apple stock options behind to
    follow Jon to Palm. Bono and Elevation Partners? Not so much!
    matthew_maurice
    • I told you so!

      The day they announced that the Pre would be launched only on the Sprint network (CDMA, and not GSM), I posted on ZDnet: they are doomed! GSM is undoubtedly the preferred standard for the roadwarriors (and most are executive level, read: opinion forming). Steve Jobs was smart to launch on ATT's GSM network, why in heavens didn't Palm do the same? Shouldn't we imitate the winners, instead of betting on the uncertain?
      ahebra@...
      • not the network protocol

        If only the network mattered then it would be a verizon phone that would win the battle. Verizon has the best service, not to be confused with customer service which sucks all across the board. Verizon has the best coverage and capacity. Just ask any ATT customer about dropped calls and slow load times on their wonderful iPhones.
        Al_nyc
        • IPhone and AT&T customer

          I don't drop calls or have slow problems. It's funny though. The one thing I do is look up directions while on the phone. I never realized that you can't do that on Verizon. For me the iPhone does everything I want. As far as multitasking, I would like to see some apps do it. But not everything needs to be running in the background. IM software and streaming radio are the 2 that I would like to see in the background.
          etshea@...
          • Since when?

            Many of Verizon's phones - smartphones, at least, have the Verizon Navigator.
            Wolfie2K3
          • Yeah, but is it free?

            Is the built-in navi/maps app free? No. Check.
            JPIndustrie@...
          • Everyone Is Missing the Point

            All of my friends with iPhones complain of dropped calls. I have a friend that lives near the football stadium and whenever there is a game he can't make or receive calls. It doesn't matter what protocol your phone runs on. Both I and my father have the Moto Droid and both of us can talk, txt, and send/receive Email, all at the same time. AT&T Commercials are not true! I told Verizon this and they said "Good for You."
            Back to the Palm! They only offered the phone through one carrier. Duh! Morons (Palm People, $1.6B - $1.8?). I don't sell cell phones, but I would consider the total market share Sprint owns on Smartphones, then by how many are Windows Mobile users and base my assumptions from there. You can't magically gain market share from Verizon users if you don't sell phones through the carrier itself.
            Just FYI?I have a friend with the Palm and it?s a lot better then the Moto Droid as far as performance and web browsing.
            TheBadMan
  • But lawyers need money. Isn't working for money against your Religion?

    And exactly what "crime" is being committed here...?
    Qbt
    • Our "religion" only applies to software.

      [root@localhost ~]#
      Subsentient
  • Wow you are clueless

    You don't understand much about phone technology do you? There is lot of competition on the handset market. It's not monopolized other than by what carrier agreements you can negotiate. Even if you were right, you don't make sense. "Yea, let's sue our way to profitabilty. No need for product innovation..."
    Jim__J
    • Re: Clueless

      [i]""Yea, let's sue our way to profitabilty. No need for product innovation..." [/i]

      Well it worked fine for Opera...
      JT82
      • Re: Clueless

        And SCO, too.............
        Rexxrally
  • I agree with you 100% Linux Geek!

    I say we call the lawyers ourselves and get this staretd!!
    Ron Bergundy
    • Or LRD... :\ nt

      nt
      T1Oracle
  • re:The real culprits are

    And what are the deceptive practices? Back your comment up with facts.
    etshea@...
  • Linux Geek you are completely without a clue

    and you really suck at promoting Linux and trashing Apple and MS... but for my own amusement let me take this point by point:

    [b] The real culprits are Apple and M$.[/b]

    Interesting - most people hop on one or the other bandwagon... but you are completely misguided here. The reason Palm isn't doing so well is that Palm can't deliver the product Apple can though it is doing well with the sheer arrogance part... the difference is Steve has sales figures to back up his arrogance. And Microsoft... even with that sucky WM they are outdoing Palm. And you forgot to mention that upstart Android which also has been taking hits at Palm's sales. Oh, wait, Android is Linux so they are okay.... [b]

    The first is using deceptive practices to lure customers to iCrap [/b]

    iCrap... how original of you. And how are their business practices deceptive? Provide something other than your usual idiotic rants please. [b]

    and the second is refusing to open its protocols so Palm can use them.[/b]

    And WHY should MS have to open their protocols so that Palm can use their proprietary sync software? And for that matter why should any company? What's next? Should RIM open up their BB desktop manager to sync with Android devices and iPhones? Just because Palm is too lazy to come up with their own workable sync software does not mean that any other company has to pick up their slack... Besides it is [i]Apple's[/i] iTunes software Palm keeps trying to hack into to get the software to recognize the Pre as an iPod... do some research at least you idiotic troll.[b]

    It's time to call in the lawyers! [/b]

    Yeah, on Palm for their repeated attempts to hack into a competitor's proprietary software.
    athynz
    • you don't know squat

      Apple does not allow palm to access iTunes and it's blocking them from OSX.
      M$ did not published its protocols as required by the courts in US and EU.
      Linux Geek
      • Seriously?

        That is your comeback? A whine about how Apple rightfully does not allow Palm to access their proprietary software - iTunes? As for them blocking palm from OSX that is just a bunch of crap and FUD being spread... Post a link to a credible source detailing this if you can find one?

        As for MS not publishing it's protocols - again, provide proof... which I seriously doubt you have.
        athynz
    • He's referring to...

      those mean and nasty bullies at Apple not letting poor 'ickle Palm
      piggyback their media management software.
      webmaster@...
  • The real culrpits: junk hardware, worse software

    I'm on my third Pre. The other two sent back disfunctional.

    The Treo 755 and 650 had superior keypads, clearer screens and were fully integrated to my other computers.

    Don't blame anyone else. Palm put out a bad product and I'm going to throw my Pre in the trash before its first birthday because I feel like I'm eating welfare cheese every time I use it.
    rp518