Palm Beats Analysts' Expectations, Revenues Up 30%

Posted By: Ed Thursday, September 20, 2001 5:31:32 PM

While Palm's most recent quarter was far from the best in the company's history, neither was it the worst and it did better than the pessimistic predictions of market analysts. The company reported a net loss of $32.4 million, or 6 cents per share, for the first quarter of its fiscal 2002. After excluding special items, it had a loss of $38.7 million, or 7 cents a share, which is better than the 9-cent loss that had been predicted by analysts. In a related announcement, the PalmSource conference which had been scheduled for next month, has been postponed.

It had $214 million in revenues during the quarter, which is in the range that was predicted by the company in July. Palm's revenues were 30% higher than in the previous quarter.

It had sales of approximately 750 thousand Palm branded handhelds. That brings the grand total to over 14 million ever sold.

Palm's CEO sounded a note of cautious optimism. "While there is much yet to do, we made significant progress on key operational goals in the quarter despite continuing worldwide economic uncertainty and growing competition."

Recently, there had been slowing demand for handhelds as the economic situation in the U.S. and around the World worsens. This has helped set off a price war among the Palm and its licensees that has cut margins to the bone.

This was exacerbated by Palm's poor handling of the roll-out of the m500 series which eventually left the company with large number of unsellable obsolete inventory.

Still, the company is working hard to dig itself out of the hole. The company has cut operating costs by about 25% and reduced the amount of inventory it has in the channel.

Palm's top executives knew going into its first quarter of fiscal 2002 that it would not be a profitable one but they had hoped that the current one will be. They now say that they expect to take a small loss this quarter, too.

"We had expected to generate a small operating profit in Q2, [but] while working toward profitability remains a top priority, we now believe it will take beyond Q2 to achieve this goal,'' said Chief Financial Officer Judy Bruner.

In a related announcement, the PalmSource conference which had been scheduled for next month, has been postponed.

"We're postponing PalmSource out of respect for those affected by last week's events and the related concerns expressed by registered attendees and sponsors,'' said David Nagel, chief executive officer of Palm's Platform Solutions Group.

Palm plans to reschedule the event for later this year or early next year and will announce further details later on.

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No i705 in 2001!

I.M. Anonymous @ 9/20/2001 6:17:41 PM #
Palm has decided not to release the i705 this year. They are saying that it is due to the market and it is to close to Christmas, but could it be they are revamping it somewhat....

RE: No i705 in 2001!
I.M. Anonymous @ 9/20/2001 6:37:54 PM #
Is this a fact or a rumor. I am in need of a replacement for my Vx and Omnisky so I hope it is only a rumor.

RE: No i705 in 2001!
Spartacus @ 9/20/2001 6:52:49 PM #
ED, have you heard what this guy is claiming. A color wireless device thats also a cellphone would be awesome

RE: No i705 in 2001!
I.M. Anonymous @ 9/20/2001 7:11:51 PM #
On the quarterly conference call, Palm did in fact state that the i705 would not be released this year.

RE: No i705 in 2001!
Ed @ 9/20/2001 8:06:27 PM #
For irritating technical reasons, I wasn't able to hear the actual conference call. However, I just spoke with someone at Palm's PR firm who confirmed that the i705 has been delayed but had no details. I'm trying to get in touch with some of my contacts at Palm and see if I can get anything more.

If anyone has anything else on this, please share.

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News Editor

RE: No i705 in 2001!
I.M. Anonymous @ 9/20/2001 8:42:04 PM #
I bet they got a look at the Treo with wireless voice AND data and crapped themselves!

RE: No i705 in 2001!
Ed @ 9/20/2001 8:59:01 PM #
I've posted an article on this with what I know:
http://www.palminfocenter.com/view_Story.asp?ID=2354

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News Editor
RE: No i705 in 2001!
I.M. Anonymous @ 9/21/2001 10:44:42 AM #
I don't care about any new PDA until they have ARM. I love my 505 but I would really like a faster processor, 128MB RAM, and a battery that lasts a week between charges. I wouldn't mind it being a little bit thicker. With afterburner @54MHz, my side light on, and heavy use I have a tediously slow PDA that I have to drop into the cradle daily. My Vx was alot faster with a slower processor without the VFS. Much less memory ( and I wouldn't switch back to it) but I miss it. Using the card to clear out the RAM really is awkward. 128MB RAM would be SWEEEEET!

RE: No i705 in 2001!
I.M. Anonymous @ 9/21/2001 5:14:49 PM #
> I don't care about any new PDA until they have ARM. > I love my 505 but I would really like a faster
> processor, 128MB RAM, and a battery that lasts a
> week between charges. I wouldn't mind it being a
> little bit thicker.

It's called a PocketPC.
Look at the new handhelds coming from HP, Toshiba, Casio, Compaq, etc...

ARM processor running at 206 MHz, virtually unlimited memory using compact flash cards or micro-drive.

No one has batteries lasting a week straight with color but new lithium-polymer batteries are great. The new HP Jornada can do 14 hours with backlighting.

RE: No i705 in 2001!
I.M. Anonymous @ 9/21/2001 6:59:44 PM #
He said he wanted a WEEK between charges, not an HOUR.

RE: No i705 in 2001!
I.M. Anonymous @ 9/24/2001 7:39:18 AM #
You are right. The pocket PC may be what I yearn for. Two things hold me back: 1. As awkward as it is, I know how to use the VFS. 2. There appears to be so much more software that addresses my needs written in Palm OS than in the Pocket PC format. If there was someway to run Palm OS on the Pocket PC smoothly I would bolt. Your point is well-taken.

"Whooopeee!!! We ONLY lost $39 Million this quarter!!!!!!!"

I.M. Anonymous @ 9/20/2001 7:09:14 PM #
..

RE:
I.M. Anonymous @ 9/21/2001 10:19:19 AM #
right, that's what i've never figured out. "We did good, because we LOST less than people figured we would"!?!?!

You've obviously know little about business
I.M. Anonymous @ 9/21/2001 1:28:16 PM #
Fact: Most businesses lose money in their early stages.
Fact: In a slowing economy, more businesses lose money.

Palm established itself far quicker than most businesses of its scale. It's still relatively young. That, in addition to the slowing economy, means that it's more likely to lose money during any given quarter. Analysts attempt to predict how much profit/loss a company will have as an indicator for investors--an indicator not just of profit, but of profitability. The closer a company is to the "break even" point, the more likely it is to pay off as a sound investment. So losing less money than expected can be a "hopeful" sign.

Palm isn't "out of the woods" yet by any means, but the fact that their revenue is up in today's economy has to be great for them. They need to continue this trend if they're to get their stock price back up and return to some measure of strength.

To all you "Palm is dead" parrots out there, learn a new phrase. Perhaps, "Visor Neo and Visor Pro Suck."

RE:
I.M. Anonymous @ 9/21/2001 3:34:33 PM #
are you willing to tell me your cost basis for your Palm stock?

Whooooosh

I.M. Anonymous @ 9/20/2001 9:27:03 PM #
Didn't help pull my stock out of the toilet....

I can see the big **** doing a final circle 'round the bowl!
I.M. Anonymous @ 9/20/2001 11:02:31 PM #
..

PALM is at most worth 72 cents/share.
I.M. Anonymous @ 9/20/2001 11:26:45 PM #
Palm's P/E is still 66 vs. the S&P 500 is like 22 or less. That's over a 1/3 premium to the market. I don't think it deserves a premium. It should probably trade at a discount.

$2.15 divided by 3 = 72 cents.

RE: Whooooosh
I.M. Anonymous @ 9/21/2001 1:07:05 AM #

Ummm

Can you explain the above in a little more simplistic way?

I just bought a bunch of Palm stock @ $2.36 a share.

My logic was that it is so cheap, its bound to go up in the next 6 to 12 months.

But then again, I really don't know what the hell I'm going when it comes to stocks. AT ALL.

L8TR

RE: Whooooosh
I.M. Anonymous @ 9/21/2001 10:16:24 AM #
the darned thing is at $1.74 now. what 66 P/E? wouldn't that needing "earning" to calculate? this not to mention PALM is non divident stock.

PALM is pure market play, you invest because of stock price expectation.

RE: Whooooosh
I.M. Anonymous @ 9/21/2001 10:21:49 AM #
dude sell you're 2.36 stock now and cut your losses. This drop-off is not finished. You can catch it on the way back up (if that ever happens)

Stock Valuations Explained
I.M. Anonymous @ 9/21/2001 1:56:07 PM #
P/E = Price of a Stock Relative to Expected Earnings. The market in general (The Standard & Poors 500 for example - 500 large US companies) average price relative to expected earnings is 22. The LOWER the P/E, the CHEAPER the stock. When you buy stock you buy EARNINGS. So when Palm is selling at a 66 P/E, you are paying 3 times more for $1 of Palm's earnings than you are for $1 earnings of the average large US company (ie INTEL, GE, etc). A company must be pretty damn good if you are willing to pay 3x for it. Usually these companies have super high growth rate REVENUE EXPECTATIONS which investors are usually willing to pay more in anticipation of faster growing earnings. So if you assume PALM should be trading at EQUAL the P/E to say great companies GE, MSFT, INTC, DELL, CITIGROUP, COKE, DISNEY, etc. - that means that PALM's stock price should be 1/3 of where it is now since their P/E is 3x as much. NEVER BUY A STOCK BASED ON PRICE ALONE - JUST BECAUSE IT LOOKS CHEAP DOESN'T MEAN IT CAN GET A LOT CHEAPER! LOOK AT P/E relative to "the market" ie S&P 500. Historical average P/E of the S&P 500 is like 19.

PALM @ $1.69/share and falling.
I.M. Anonymous @ 9/21/2001 3:42:46 PM #
..

$99
I.M. Anonymous @ 9/22/2001 10:30:02 AM #
. .
O


Eulogy for Palm...

druce @ 9/20/2001 8:55:51 PM #
Unfortunately, Carl is finding out what Marc Andreson, Ray Norda, Mitch Kapor and a whole lotta others have: You can't afford to make mistakes when Microsoft is nipping at your heels.

I look at what Palm seems to have in the can for products, and it doesn't seem pretty. The i705 seemed cool, but was hardly the "Blackberry Killer" that they were hyping (not that this was a good goal in the first place). The newly released M125 seems to be a low end model with a high end cost, which leads me to wonder which market it was going after.

Palm has stated that they are going toward ARM processors with PalmOS 5.0. PalmOS 5.0 will have to be a complete rewrite of their OS, and given the fact they they only just bought Be, I would say that they aren't very far along. As has been proven by Apple and Microsoft, it is often a long and painfull process moving to a totally new OS. This is going to be a long and painfull eighteen months for Palm if they are planning something similar. They do not need this while Microsoft is gaining market share.

The fact that they have companies like Motorola dropping off the bandwagon also does not bode well.

Don't get me wrong. I love my M505. I also loved my Macintosh and my Amiga. I figure I can get another year out of it.


RE: Eulogy for Palm...
I.M. Anonymous @ 9/20/2001 10:13:28 PM #
What do you mean "Motorola is jumping off the bandwagon"? As far as I know, Moto is going to be supplying Palm with the Xscale CPUs that will power the "next generation" Palm devices. Has something changed that I don't know about?

RE: Eulogy for Palm...
I.M. Anonymous @ 9/20/2001 11:49:40 PM #
My guess ist that we will see neither BEOS nor OS 5.0 - You just count 1&1 together and you come to this result: Given the the tracking down on dedicated 3rd party websites who spread the logo Palm or have Palm in the URL the signs are definetlely that they are preparing for a takover. The power Palm showed 24 month ago is a flat tire today - I wounder what the 2.300 employees are doing the whole day besides buerocraticly moving papers and seeing their lawyers if they have a idea - a sad, sad story...

RE: Eulogy for Palm...
I.M. Anonymous @ 9/22/2001 4:58:50 AM #
I think what he ment by the "Motorola" comment wasn't about the microprocessor part (I am sure that Motorola will continue to sell Palm Dragonballs until they go under). It had to do with Motorola announcing (as well as Nokia) that they had scrapped their plans to make a Palm-based smart phone.

m505 Sales Way Up?

Ed @ 9/21/2001 10:23:12 AM #
The Standard made an interesting point about these numbers. Palm's unit sales are only up 7% while their revenues are up 30%. Clearly, it is selling a lot more high-end handhelds. Sounds like the m505 is doing well.

http://www.theregister.co.uk/content/7/21797.html

---
News Editor

RE: m505 Sales Way Up?
I.M. Anonymous @ 9/21/2001 12:15:09 PM #
seeing PALM OS units sold as a whole, we can safely say that it has reached market saturation. it is essentially a flat liner, despite the price war in early Q3.

RE: m505 Sales Way Up?
I.M. Anonymous @ 9/21/2001 12:43:31 PM #
If sales had been down you would have taken that as reason why Palm is in trouble. Sales are up so you also see that as a sign that Palm is in trouble? There's just no satisfying some people.

You left out your catchphrase: Palm is Doomed.

RE: m505 Sales Way Up?
I.M. Anonymous @ 9/21/2001 1:56:28 PM #
tell me if it is not a market saturation, last year Palm was enjoying growth in tripple digit, than all of a sudden it is either negative or single digit.

It's classic. A campany cannot keep selling consumer electronic product without giving a real "feature improvement" and expect sales keep climbing.

OK, it's 7%, but what is the overall handheld growth? how about HS? or Sony? (ie. the overall picture)

Only dumb person will hyping the 7% growth as a sign of light at the end of tunnel, instead of a dire warning that it is a flat liner and the product need to be refreshed immediately. Whoever heard a consumer electronic growth at 7% on entire range of company product. Kellogs cereal maybe, but not a handheld.

m505 Sales Ar Way Up
Davy @ 9/21/2001 2:56:10 PM #
To all the people who are complaining about Palm sales being slower....

The point of Ed's statement was m505 sales were succesful! Do you have to read between the lines on every fricking post? m505 sales are good! That's the point!

RE: m505 Sales Way Up?
I.M. Anonymous @ 9/21/2001 3:32:56 PM #
good compare to what? or are we using a mantra, any positive percentage is good percentage?

heck even m500 is "above expectation" according to Palm Inc press release.

Something the Palm-is-doomed crowd has probably missed....

I.M. Anonymous @ 9/24/2001 3:02:28 AM #
is the fact that Be, inc. is holding $11 Mil. of Palm's stock, which "which Be currently intends to liquidate as soon as reasonably practicable following the closing of the transaction."
http://www.be.com/press/pressreleases/01-09-10_nasdaq_appeal.html

You're not going to see any serious uptick in the Palm stock price untill that shoe falls. Matter of fact, the time to buy is in the middle of their sell-off.

RE: Something the Palm-is-doomed crowd has probably missed..
I.M. Anonymous @ 9/24/2001 5:45:23 AM #
Probably you have missed this sideline that new Linux PDA's have been released for under $100!!!

http://www.linuxda.com/store/infopda.html

Could you imagine what this means to the palm Christmas sales without a new product?

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