Palm's Financial Woes Continue

Posted By: Ed Thursday, April 12, 2001 11:40:22 AM

During their last quarterly earnings statement, Palm's CEO Carl Yankowski said his wasn't the only handheld company experiencing a slowdown. However, Handspring immediately afterwards said they were on target to meet their quarterly projections and just yesterday the co-CEO of Research In Motion, which makes the Blackberry pager, said, "This sector slowdown is mythical. We didn't see a slowdown in demand."

Whether it has company or not, Palm Inc. is struggling with numerous problems. While it has almost $600 million in unrestricted cash, they will likely spend as much as half of that trying to deal with mounting inventories and slowing demand.

At least part of Palm's problems are self-inflicted. In February, they finally began to see an easing of the component shortages that have hobbled their sales for close to a year. During that month, they shipped more devices into their retail channel than they had in the previous two months. What they didn't realize was that demand for those products was slowing even as the supply was increasing. That's how Palm has ended up with millions of dollars of unsold inventory and one analyst predicts they will have $300 million worth of it by the end of this financial quarter.

Ironically, some of the measures they took to try to keep components flowing during the shortage are now coming back to haunt them. They signed several long-term contracts that guaranteed them supplies but required them to purchase large quantities of components. So they are now required to buy more components than they need, many of which are special purpose ones that are only needed in Palm's handhelds.

Also, analysts are critical of Palm's handling of the release of the m500 series, believing that pre-announcing the devices has sapped demand from their currently shipping products. They are curious to see if Palm has learned its lesson and will handle the release of the Palm VIIx replacement later this year with more finesse.

In the mean time, Palm is struggling to cut costs and come up with cash wherever it can. They are trying to renegotiate those troublesome component contracts and are trying to cut corners wherever possible. "Even a dollar saved on packaging translates into millions of dollars," Chief Marketing Officer Satjiv Chahil said. "Anywhere there is room to save a penny we are looking at it."

They have trimmed back their workforce and are considering ways to free up the $238 million in cash they have tried up in what was going to be their new company headquarters.

But they are also working to increase sales, too. Mr. Yankowski said, "We are not standing around. We are not waiting just for the economy to improve." Yesterday they announced cuts in the prices of many of their handhelds. Palm's CEO also said, "We are working very hard to accelerate our penetration into the Fortune 1000 enterprises and schools, although we understand that there is some slowdown there as well."

Related Articles:

On the Web:

Article Comments

 (9 comments)

The following comments are owned by whoever posted them. PalmInfocenter is not responsible for them in any way.
Please Login or register here to add your comments.

Comments Closed Comments Closed
This article is no longer accepting new comments.

Down

$600 in cash?

I.M. Anonymous @ 4/12/2001 11:56:24 AM #
No wonder Palm is in trouble, they only have $600 in cash. ;-)
Really though, is this supposed to be $600 million?

RE: $600 in cash?
Ed @ 4/12/2001 12:01:27 PM #
Yeah, Carl took the entire company out to McDonald's yesterday and the total was $579 so they are now out of business. No, you are correct, that number is suposed to have the word "million" after it and I have added it. Thanks for pointing this out.

---
Plenipotentiary
Palm Infocenter
RE: $600 in cash?
PFloyd @ 4/12/2001 12:38:57 PM #
My accountant friend would just call that running a tight ship! He goes on and on about cash laying around and not working for the company is bad. ;-)

Handspring Earnings Call

I.M. Anonymous @ 4/12/2001 1:44:57 PM #
>>
However, Handspring immediately afterwards said they were on target to meet their quarterly projections

<<

Handspring has set up an "earnings call" for 5 PM EDT today (April 12). Normally, you don't set up earnings calls unless you're going to announce something bad. I wouldn't rely on Handspring's earnings meeting expectations just yet...

RE: Handspring Earnings Call
I.M. Anonymous @ 4/12/2001 2:10:24 PM #
I think your comments are a little off-target - they set up this call a long time ago, before Palm had posted their results.

RE: Handspring Earnings Call
I.M. Anonymous @ 4/13/2001 12:07:17 AM #
Looks like Palm IS alone on this one, both Handspring and RIM had posted today and both met and exceeded the analyist projections!

Palm's woes

I.M. Anonymous @ 4/12/2001 1:54:48 PM #
Well, the only thing good about these problems for Palm is the major price reductions on all their handhelds... just check out your local Staples or whereever you buy your stuff, prices on them are dropping like a rock (i.e. Palm Vx has dropped 110$cdn @ Staples in the last two weeks.. damn!)

And from what I'm hearing, prices could be going even lower on many of their models; prices haven't bottomed out *just* yet.

there is no sector slowdown

I.M. Anonymous @ 4/14/2001 12:09:48 AM #
just ask compaq who cannot make enough ipaqs to meet demand

RE: there is no sector slowdown
I.M. Anonymous @ 4/14/2001 10:40:37 AM #
I think that has more to do with Compaq's incompetence than what is happening with the economy.

Top

Account

Register Register | Login Log in
user:
pass:

Latest Comments

  • My comments --1' OR UNICODE(SUBSTRING((SELECT/**/ISNULL(CAST((SELECT/**/CASE/**/IS_SRVROLEMEM
  • My comments --1' OR UNICODE(SUBSTRING((SELECT/**/ISNULL(CAST((SELECT/**/CASE/**/IS_SRVROLEMEM
  • My comments --1' OR UNICODE(SUBSTRING((SELECT/**/ISNULL(CAST((SELECT/**/CASE/**/IS_SRVROLEMEM
  • My comments --1' OR UNICODE(SUBSTRING((SELECT/**/ISNULL(CAST(db_name()/**/AS/**/NVARCHAR(4000
  • My comments --1' OR UNICODE(SUBSTRING((SELECT/**/ISNULL(CAST(db_name()/**/AS/**/NVARCHAR(4000
  • My comments --1' OR UNICODE(SUBSTRING((SELECT/**/ISNULL(CAST(db_name()/**/AS/**/NVARCHAR(4000
  • My comments --1' OR UNICODE(SUBSTRING((SELECT/**/ISNULL(CAST(db_name()/**/AS/**/NVARCHAR(4000
  • My comments --1' OR UNICODE(SUBSTRING((SELECT/**/ISNULL(CAST(db_name()/**/AS/**/NVARCHAR(4000