Palm Reports Q2 FY07 Results
Palm, Inc. today reported revenue of $392.9 million in the second quarter of fiscal year 2007, ended Dec. 1. Smartphone sell-through for the period totaled a company record-high 617,000 units, up 42 percent year over year and up 8 percent sequentially.
Net income in the fiscal quarter totaled $12.8 million, or $0.12 per diluted share. Net income included stock-based compensation expense of $6.5 million and amortization of intangible assets of $0.3 million. This compares to net income for the second quarter of fiscal year 2006 of $260.9 million, or $2.51 per diluted share. The second quarter of fiscal year 2006 net income reflected the effect of a partial reversal of a deferred tax-asset valuation allowance of $226.3 million.
Net income for the quarter, on a non-GAAP basis, totaled $17.6 million, or $0.17 per diluted share, excluding stock-based compensation expense and amortization of intangible assets, and adjusting the income tax provision to 40 percent. This compares to non-GAAP net income in the second quarter of fiscal year 2006 of $24.4 million, or $0.24 per diluted share, excluding the effects of restructuring charges, amortization of intangible assets and deferred stock-based compensation, the related income tax provision, and the partial reversal of Palm's valuation allowance against its deferred tax asset.
"We are pleased to report strong Treo sell-through this quarter, which is one of the most important metrics. More customers throughout the world bought Treo smartphones than ever before," said Ed Colligan, Palm president and chief executive officer. "In addition, we accomplished a number of strategic objectives during the quarter: shipping two new Treo models to expand both geographically and demographically, securing perpetual rights to the Palm OS source code, and diversifying our manufacturing partners to strengthen our cost position and our product pipeline."
Third Quarter Fiscal Year 2007 Outlook
Based on current trends, Palm provided its outlook for financial results in the third quarter of fiscal year 2007, which ends March 2, 2007. The company expects the following:
- Revenue to be in the range of $400 million to $410 million;
- Gross margin to be between 35.8 percent and 36.3 percent on a GAAP basis and between 36.0 percent and 36.5 percent on a non-GAAP basis;
- Operating expenses to be between $134 million and $139 million on a GAAP basis and between $128 million and $133 million on a non-GAAP basis;
- Annual tax rate on a GAAP basis of 41 percent and, on a non-GAAP basis, 40 percent;
- Earnings per diluted share to be between $0.08 and $0.10 on a GAAP basis and between $0.11 and $0.13 on a non-GAAP basis; and
- SFAS 123R stock-based compensation expense, before taxes, to be between $5.5 million and $6.0 million and amortization of intangible assets to be $0.3 million. These amounts and the related income tax amounts are excluded from Palm's third quarter of fiscal year 2007 outlook on a non-GAAP basis.
Highlights of the Quarter
During the first quarter of fiscal year 2007, the company accomplished the following:
- Began selling the five-band Treo 750v smartphone using Windows Mobile 5.0 Pocket PC Edition on Vodafone's 3G/UMTS network. That smartphone now is available in nine European countries: Austria, France, Germany, Ireland, Italy, Netherlands, Spain, Switzerland and the UK. It also is available in five countries in Asia Pacific: Hong Kong, Indonesia, Malaysia, New Zealand and Singapore;
- Launched the Treo 680 smartphone using Palm OS on Cingular Wireless' network in the United States and also in a GSM model around the world through Palm online sales and Palm retail;
- Announced the sale of four Treo smartphone models on a total of 20 carrier networks. Six carriers are new to Palm: Movistar Peru, Vodafone Austria, Vodafone Germany, Vodafone Netherlands, Vodafone Switzerland, Vodafone UK;
- Announced the availability of the Treo 700wx on the Sprint Power Vision network in the United States;
- Began manufacturing the Treo 680 smartphone through a China-based partner enabling Palm to deliver that product to more regions faster. Palm plans to offer the Treo 680 on 20 carrier networks around the globe by the company's fiscal year 2007 end;
- Begun investing in a $25 million marketing campaign, made public Dec. 11, that is focused in the United States but also reaching to Europe and other regions. The "passion brands" campaign intends to generate mainstream awareness of the Treo smartphone line by helping new and potential users appreciate how their personal and work lives can be enriched with a mobile computer that also is a great phone. Campaign partners include eBay, Fandango, Google, The Onion, Orbitz and Yahoo!; and
- Hired Brodie Keast as Palm senior vice president, marketing. Keast is responsible for product strategy and the mobile-computing roadmap for consumers, mobile professionals and businesses, as well as for marketing and brand-building.
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RE: Allah be praised!
Query: was the $44mil cost of buying PalmOS back from ACCESS reflected in these figures?
RE: Allah be praised!
was the $44mil cost of buying PalmOS back from ACCESS reflected in these figures?
Yes. That cost was amortized over 5 years. Which is a pretty good deal if you consider that Palm's minimum payment to ACCESS was previously $42.5M for a single year, and that was without the enhanced development rights they now have.
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
RE: Allah be praised!
RE: Allah be praised!
Not quite the gloom and doom that was predicted eh? =)
RE: Allah be praised!
$13 million is chump channge. Especially when up until now Palm has had limited competition. I haven't gone over the filing or the conference call, but it would be interesting to see if Palm included revenues from presales of delayed devices to carriers in their "positive" section of the ledger. If they did, they're continuing their legacy of stealing from the future to make the present look good
TVoR
RE: Allah be praised!
Next Q will have a large boost from Treo 680 and 750 sales (whether you personally approve of the specs or not). I wouldnt worry too much. with all the competition, they will not likely have a great year like 2005 ever again, but they will hold thier own in the market...
RE: Allah be praised!
You're correct - we were expecting a $10 million LOSS. Hmmmmmmmmmm...
Companies do fudge numbers from one q to the next, but you cant do that for more than a quarter (unless maybe your Enron).
You're not very familiar with Palm's history, are you? It's easy to go on, quarter after quarter manipulating the figures. EVENTUALLY, things catch up with you, but hopefully by then the company is bought out by another company with deep pockets tha can easily write off whatever charg is needed to bring the books back to some semblance of reality.
Next Q will have a large boost from Treo 680 and 750 sales (whether you personally approve of the specs or not). I wouldnt worry too much. with all the competition, they will not likely have a great year like 2005 ever again, but they will hold thier own in the market...
Wrong. How much is Palm making per Treo 680 sold compared to the 7xx series? What happens if the 680 merely cannibalizes sales of more lucrative Treo 7xx instead of growing the market? And what about all of the competitors entering the smartphone market? What will happen to Palm's slice of the pie (especially now that pie is not growing significantly)?
TVoR
Net income in the fiscal quarter totaled $12.8 million
$12.8M? I think that's what Nokia spent on toilet paper last quarter for their employees to wipe their asses with.
RE: Net income in the fiscal quarter totaled $12.8 million
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
RE: Net income in the fiscal quarter totaled $12.8 million
I'm still waiting for the mythical color HandEra.
Colligan's word of the day: diversification
After questions from two or three different callers the only things he let slip are that the "differentiation" has to do with "experience on the Internet," "out-of-box experience," and vague reference to a "range of applications in the pipeline."
I wasn't really expecting any big announcement about the Secret Third Business. But I got the feeling (one said as much) that the callers were a bit taken aback that Colligan didn't give the kind of "we'll release four new Treos" guidance that he gave last year. Instead just the word "diversification" repeated about 30 times.
The only other "color" he put on it (they love that word in these conference calls) was that Palm would be adding devices at both the high, "Mercedes" end and the low "graduating from feature phone" end.
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
RE: Colligan's word of the day: diversification
RE: Colligan's word of the day: diversification
"new form factor"
You're right, that was in there, too.
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
RE: Colligan's word of the day: diversification
My precictions:
#1 Mildly refreshed CDMA POS Treo. Basically the 680 formfactor with the 700p's camera + EVDO CDMA radio. Fixes all of the 700p's lingering bugs. Just one color (graphite). Available June-ish.
#2 A sleek/thin WinMob GSM Treo. Think a (chunkier) SLVR-type design with basically the same specs of the 750v, much like how the Palm V had nearly identical specs as the Palm III but just thinner, sleeker and with a rechargable battery.
#3 A single new POS PDA. I'd expect a mild refresh of either the E2 (2x the RAM, BT 1.2) or a TX2 (2 to 4gb internal flash drive) just to continue to justify some kind of retail handheld presence. A Z33 type device (<$100 with a DSTN color screen ,headphone jack & SD slot) wouldn't be out of the realm of possibility nor would two new POS PDAs. Either way, expect very minimal R&D expenditure on Palm's part here. Available in the usual March/April timeframe.
#4 The "new" secret third business Hawkins device ("STB"), available mid-summer. I expect the STB to be something larger than a LifeDrive but smaller than a Newton, running either a home-brewed Linux variant OR a very heavily hacked/modified (with M$' permission & assistance, of course) WinMob. I figure on a VGA screen and some large local storage medium (8gb of flash? an 8gb microdrive? a 20gb 1.8" Toshiba HD?) + the usual service-oriented stuff Beersie & Michael Mace have hinted at here previously. Either way, I'm expecting a lot of potential in theory but an actual shipping product marred by too much cost-cutting and a lack of "zen". O' tap counter and shirtpocket block o' wood, where are you now?
#5 The solid Treo 680/750 formfactor will also spread to the rest of the lineup and the WinMob-powered CDMA 700wx will probably receive a mild spec boost and the antenna-less formfactor alongside the Palm OS-based midyear refresh.
Pilot 1000-->Pilot 5000-->PalmPilot Pro-->IIIe-->Vx-->m505-->T|T-->T|T2-->T|C-->T|T3-->T|T5-->TX-->Treo 700P
RE: Colligan's word of the day: diversification
who in their right mind will buy #3 and #4?
IMO, palm needs a RAZR-like-Treo with iPod/iTunes capabilities.
Also, for business, they need to work on this Email Sync business to be more like Blackberry - ie BULLETPROOF PUSH EMAIL. I hate the fact that once an hour - EVERY HOUR my Treo has to go fetch my emails for 3 minutes and thus limits my use. Is there a SOLID GOOD PUSH Corporate Email Client for Palm? If so, why does nobody use it?
Gekko: It's called ChatterPlus
I used it when I had a treo - loved it!
PA: and it does not require a service plan from the email vendor or special account
RE: Colligan's word of the day: diversification
Remember, Palm basically enjoys a monopoly on the retail PDA market, especially in the <$200 area. Their neglected, aging lineup still enjoys reasonable sales and keeps Palm's name in front of people who might not walk into a cellular store very often.
Who would buy #3? The same people who still buy handhelds, as Ryan's notes below from the call mention 500k Palm handhelds sold. Those are 500k sold handhelds, primarily at retail, distributed between only three different models (Z22, E2, TX--not sure if the remaining LD stock is factored in there as well) that have ZERO marketing or advertising dollars behind them. On top of that, all of Palm's remaining handheld models are well over a year old and rather stingily spec'd.
If Palm can continue to tweak their devices here & there (add mp3 capabilities to the Z22, add internal flash to the TX, more RAM & better BT to E2) they can basically keep those 3 models chugging along generating some nice fallback revenue until the bottom falls out of the PDA market and/or Palm is acquired.
As for #4...I didn't predfict a sales success or even a minor hit. I just predicted that Hawkins will rally the troops one final time and resurrect glories past to get the STB to market in one form or another.
Pilot 1000-->Pilot 5000-->PalmPilot Pro-->IIIe-->Vx-->m505-->T|T-->T|T2-->T|C-->T|T3-->T|T5-->TX-->Treo 700P
RE: Colligan's word of the day: diversification
O' tap counter and shirtpocket block o' wood, where are you now?
He's making them out of foam instead of wood these days.
http://money.cnn.com/2006/03/23/technology/business2_workingtech0323/index.htm
Gekko wrote:
Is there a SOLID GOOD PUSH Corporate Email Client for Palm? If so, why does nobody use it?
Yes. Good Technology's client seems to be the front runner. And Colligan said yesterday that 10-12% of the Treos in use have active Good email accounts on them.
Personally, I cannot fathom why anyone wants push email. The whole point of email for me is that I can read it when I choose, not when the sender chooses. Why pay money to give away that control? Just goes to show you that in mobile everyone wants something different.
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
RE: Colligan's word of the day: diversification
Still, like you said, everyone wants something different.
RE: Colligan's word of the day: diversification
How is this description a third business? It's just a pda with a different OS.
No the new device would have to be something different, perhaps a watch, or an intelligent pen or some such, to warrant the 'third business' moniker.
Incidentally, I missed what the 1st and second were. pda and smartphone? Not too sure they're really separate busninesses these days.
RE: Colligan's word of the day: diversification
because in my business, the fast eat the slow.
RE: Colligan's word of the day: diversification
For most business people and "knowledge workers" I know (certainly not all) the battle against distraction is a bigger problem in their day than responding to an email an hour after it was sent. I've worked in a couple companies where management really tried to train people NOT to check their email more than once every couple of hours because of the cost of the distraction. I believe much of the addiction to push email is just that: a psychological addiction to having constant connection that doesn't really translate into a business requirement.
If you're a network admin or a commodities trader that's admittedly another story. But look at Warren Buffet: he's never checked his email once. Ever in his whole life!
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
RE: Colligan's word of the day: diversification
people like to do business with those that respond quickly and have a sense of urgency. this is especially true on the east coast. push email facilitates this.
i agree that for a nickel and dime programmer who works out of his basement in Nowhere, Colorado, push is not a requirement.
RE: Colligan's word of the day: diversification
Wish I could work out of my basement in nowhere Colorado, but mainly I work out of Pikesoft's Chicago office these days.
You're right about one thing, though: urgency in software development is defined in terms of how fast you and your team deliver a bug-free product, not whether you can receive email notifications while you're on the john.
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
RE: Colligan's word of the day: diversification
Adding wifi (a mercedes) is not going to be enough for a carrier to add the phone to their portfolio. I wouldn't expect another GSM treo until mid '08. Nor, unfortunately, would I expect a new treo for CDMA (they need, at least the 680 form factor) until end of '07.
It's safe to say the 700w and 700p were not hits. Palm's design was 2 years old and need to move to a slim 680 form factor soon. However the carriers must be willing and they may drag their feet until they get rid of their inventory.
Palm wanted to play with the big boys, now they are and repeated product delays are proving they are not able to do so because of their size.
The only thing they can do to drive growth at this point is enter new product categories:
1) free feature phone - unfortunately palm is not innovative enough to make this move.
2) mini-tablet - which looks to be a flop. Why would I need that in addition to a laptop and a treo/pda?
They need to make a feature phone and sell it off their website until carriers adopt it.
RE: Colligan's word of the day: diversification
I think that Ed was using" diversification" to mean differentiation, as in differentiating their product from other similar competitive products through the advertising campaign (e.g., our email, PIM, and internet is a better experience than Nokia's, Motorola's, etc).I don't. He used phrases like "broader product line," "platform development," "new services," "new form factors," and "range of applications in the pipeline." He talked about this being where a lot of their R&D budget is going, and explained his reluctance to disclose very much about what "broader product line" meant because of competitive concerns. It was actually pretty obvious that he was talking about diversification relative to what Palm sells today.
The only thing they can do to drive growth at this point is enter new product categories:
1) free feature phoneNot going to happen. Palm (correctly) sees their competitive advantage as being mobile computing devices, not commoditized feature phones.
2) mini-tablet - which looks to be a flop. Why would I need that in addition to a laptop and a treo/pda?Based on your comments, you probably don't. But I think there are a lot of folks for whom none of those mobile devices are really cutting it. No one has come up with a really good answer for them. I'm one of those people.
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
RE: Colligan's word of the day: diversification
craigdts wrote:
I think that Ed was using" diversification" to mean differentiation, as in differentiating their product from other similar competitive products through the advertising campaign (e.g., our email, PIM, and internet is a better experience than Nokia's, Motorola's, etc).
I don't. He used phrases like "broader product line," "platform development," "new services," "new form factors," and "range of applications in the pipeline." He talked about this being where a lot of their R&D budget is going, and explained his reluctance to disclose very much about what "broader product line" meant because of competitive concerns. It was actually pretty obvious that he was talking about diversification relative to what Palm sells today.
The only thing they can do to drive growth at this point is enter new product categories:
1) free feature phone
Not going to happen. Palm (correctly) sees their competitive advantage as being mobile computing devices, not commoditized feature phones.
2) mini-tablet - which looks to be a flop. Why would I need that in addition to a laptop and a treo/pda?
Based on your comments, you probably don't. But I think there are a lot of folks for whom none of those mobile devices are really cutting it. No one has come up with a really good answer for them. I'm one of those people.
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
RE: Colligan's word of the day: diversification
when is the pikesoft IPO and subsequent acquistion of we-com???
RE: Colligan's word of the day: diversification
Are you crazy? Pikesoft is not acquiring we-com. They just acquired us. And let me tell you, I'm up to my armpits in eknarr right now.
Together we've completed the e-com circle with a people-driven we-com solution. In exchange for thoughts we can enhance your choices with a we-com virtual wallet, and...
Bah. I can't do it. How does e-tellurian come up with that sh*t?!
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
RE: Colligan's word of the day: hocus-pocus
You'll ALWAYS be just "nickel-and-dime-programmer" to me, Beersy. Tour're not even a two-bit programmer, Bubba.
And let me tell you, I'm up to my armpits in eknarr right now.
Just sell the eknarr to Mike C. as a desert topping. eknarr... Mmmmmmm... Too bad about the smell.
TVoR
Media reaction negative, but what do they know anyway....
But sales of Palm’s other new device, the colorful and cheaper Treo 650, did go on sale during the second quarter, yet didn’t manage to make up for the missing 750 model despite a recently announced $25 million worldwide marketing campaign, which includes “street teams” of Palm reps deployed across cities wearing Treo-branded clothing to generate buzz.
That little gem is from Forbes. Nevermind that the marketing campaign only began a week ago, or that the new Treo hasn't been on sale much longer than that, or that it's actually called the Treo 680, dork-meister...
Who are these people that get paid to comment on products they don't even pay attention to the name of? I want in on the analyst gig.
Tim
I apologise for any and all emoticons that appear in my posts. You may shoot them on sight.
Treo 270 ---> Treo 650 ---> Crimson Treo 680
RE: Media reaction negative, but what do they know anyway....
Ain't that the truth!
Gawd...
RE: Media reaction negative, but what do they know anyway....
WM & Palm 50/50
RE: WM & Palm 50/50
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
RE: WM & Palm 50/50
adv. & adj.
1. In direct confrontation or conflict at close quarters: The two brothers went at it head-to-head. It was a head-to-head contest all the way.
2. Arranged in a line with the heads adjacent to each other: The bunk beds were set up head-to-head.
3. Running close together in the same direction; neck and neck: The horses ran mostly head-to-head.
http://www.thefreedictionary.com/head-to-head
For his meaning, and in this context, head to head = neck and neck = equal.
The real question now is, will the cheap 680 expand the PalmOS side faster than the more powerful WM Treo 750. Only time can tell, and due to the price point difference its not really a fair fight.
Surur
They said I only argued for the sake of arguing, but after an hour I convinced them they were wrong...
Hey!! I made associate writer at PDA247. Come see my nattering over there!!
www.clieuk.co.uk/wm.shtml
RE: WM & Palm 50/50
due to the price point difference its not really a fair fight.
Aw, do I detect a pout?
Poor, poor Microsoft being discriminated against just because Windows Mobile needs 400MHz/128MB to be usable and costs $30 bucks a pop (or whatever they are charging these days to stop the bleeding). So unfair!
Just gotta yank your chain a little, Surer! :-)
David Beers
Pikesoft Mobile Computing
www.pikesoft.com/blog
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Allah be praised!
TVoR