Palm Lowers Revenue Outlook
Palm, Inc. today announced that its third-quarter fiscal 2003 results will be less than previously expected because of lower than anticipated sales of high end devices inlcuding the Tungsten T.
Revenues now are expected to be between $205 - $210 million vs. previous guidance of $230 - $250 million. Gross margins are expected to be close to 30 percent compared to the low 30 percent range for the two previous quarters. Pro forma operating expenses are expected to be close to previous guidance. Other income/expense will include charges of up to $2.7 million related to the settlement of two legal matters. Channel inventory is expected to be within the company's desired range, and balance-sheet metrics are estimated to meet previous guidance.
The primary reason for the weaker results is lower-than-expected demand at the high end of the market in the United States, in part attributable to continued weakness in Enterprise I.T. spending in the handheld space. The lower sales waring comes after Palm recently went though a 20% reduction in it's work force.
Demand for entry and mid-range products has been in-line with Palm's expectations, and demand in Europe was strong for all products. Palm's premium handheld, the Tungsten T, which has been highly praised by industry experts, comprised a lower-than-expected percentage of the mix during the quarter. The Tungsten T price reduction implemented in early February has helped to spur demand, but not enough to offset market weakness for high-end products.
"Economic uncertainty weighed more heavily than we originally anticipated on both the consumer and enterprise segments of the handheld industry. Despite these challenges, we continue to execute well operationally, and we are fully confident in the magnitude of our long-term business opportunity," said Eric Benhamou, Palm chairman and chief executive officer. "We continue to take aggressive actions to return to sustained profitability, and we remain committed to completing the transformation of Palm into two successful leadership companies in the handheld space."
As discussed during its December investors' conference call, the company expects to record charges in the third quarter related to restructuring actions. The charges are expected to be between $40 - $45 million and will include costs related to rationalizing real estate locations and reassessing the ability to sublease vacant facilities; severance payments related to headcount reductions of approximately 19 percent; and other items related to right-sizing Palm Solutions Group and PalmSource, the two groups that make up Palm, Inc.
In addition, the company expects to take a non-cash charge of approximately $100 million to reduce the carrying value of the 39 acres of land it owns in San Jose, Calif., to the current fair market value. Market conditions for commercial real estate in the Silicon Valley have continued to deteriorate, and the company no longer expects to hold the land as long as would be required to realize the current carrying value.
Palm will release final quarterly results in conference call on March 20, 2003. As of 12:45 EST, Palm's stock price is down over 10% to 10.44 on the news.
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the good news
The bad news for Palm is that very few people seem to be buying at the luxury goods end of the product line in this down economy.
Point being...
:: dk ::
RE: Point being...
According to the statements in the warning, Palm's midrange products are meeting forcasts. The problem is with their high-end products in this economy, not with their low or midrange.
We don't know yet whether anyone elses high end products (hires+ Sony NX, etc.) are meeting forecasts this quarter.
RE: Point being...
:-/
RE: Point being...
and if they are projecting $299 T|T will last until midQ3 without update, they are smoking something really good.
Once Palm enters the ARM market, consumer expectation will be just like PPC's. New product, ever cheaper price, higher performance and ever more features.
RE: Point being...
Yea, that is a valid point, especially with the Xircom 802.11b sled so expensive. The have come down some (from 299.00 to 239.00 I think), but still in the "not unless I HAVE to have it" category.
RE: Point being...
They could put hi-res and a 66Mhz Dragonball in the M515 and hit this target pretty well. Oh well, Sony already did it except for the size.
RE: Point being...
> Once Palm enters the ARM market, consumer expectation will be just like PPC's.
Why would the CPU architecture change a typical consumers expectations? They don't develop software. If PalmSG put an ARM MXL in a Zire for around same price, I would expect sales to be the same or higher.
It's price that affects consumer expectations more, not CPU architecture. Palm's problem was entering the luxury end of the market in a down economy.
RE: Point being...
AH - my predictions finally came true
Seriously, any RETARD can think that if the same or better product with better options is available months before palm comes out with anything, there IS a problem. And to top it off - our beloved palm desigeners go out of their way to introdue an extremly poor quality control issue( probably "gross neglect" would be a better term) with TT. Now as if this had not done enough damage (gotta love those palm decision makers) they went ahead and overprice it.
Palm is on a sucide mission.
Now they have a new product coming out - lets see if these "smart" people have learned their lesson. Simple math - its more profitable to sell MORE units at a LOWER price than LESS units at a higer price.
http://www.brighthand.com/article/Weak_Tungsten_T_Sales_Hurt_Palms_Bottom_Line
Ah - yes it will be a spectacular show - palm people making yet another sucidal decission.
Enjoy dear friends.
RE: AH - my predictions finally came true
RE: AH - my predictions finally came true
Proper price line up for Palm product
$99 Zire
$130 Zire2 (refresh of m105)
$150 m500
$180-200 Color Zire (update of m130)
$199 m505
$299 T|T
$399 T|T2 with 64MB and bigger screen no wireless
$499-$599 T|T with WiFi
$599 T|T with 128MB (plus one wireless)
RE: AH - my predictions finally came true
It may help IF they include the Mic/Speaker flip cover, AND they get more carriers than just AT&T, AND people become interested in doing voice and data simultaneously, AND they bundle SnapperMail...
Of course, they SHOULD be advertising it at the lower price WITH a service plan, which is how most of them will be sold. My current phone would have cost an arm and a leg if I bought it alone, but because I bought it with a plan, it only cost an arm :)
I myself might be drawn away from buying a T|T if they had it available through Cingular. I don't feel like changing my wireless provider, ISP, and email in one shot. Kind of takes the fun out of dual processors and killer battery life.
RE: AH - my predictions finally came true
>Proper price line up for Palm product
...
>$399 T|T2 with 64MB and bigger screen no wireless
>$499-$599 T|T with WiFi
>$599 T|T with 128MB (plus one wireless)
My suspicion is that nothing over $349 is selling well in this economy. So I wouldn't do any of the above, and instead freshen the m515 (lores color + OS 5 ?) and m500 (hires monochrome maybe?) levels, and maybe find some vendor to make low cost ($100) wifi or bluetooth sleds.
RE: AH - my predictions finally came true
Tungsten is all kitsch. Where is the meat?
RE: AH - my predictions finally came true
No it's not. PPC is like that. Palm OS isn't close to that.
-Bosco
Proud Member of the Top Non-Mods
Members: abosco and ImpReza M3
RE: AH - my predictions finally came true
I'm currently planning to go with Garmin's iQue 3600 when it ships. It lists for nearly $200 more than the T|T and lacks built-in Bluetooth or Wi-Fi, but has a virtual text-entry area (they aren't using Graffiti anymore, are they?), a much bigger screen and twice the built-in memory. Since I want the GPS features, it's a huge bargain compared to any dashboard GPS map device and a new PDA.
I could care less what happens to Palm, now that they've split off PalmSource. It's the OS that matters to me, not their hardware. If Sony succeeds in a bid to buy PalmSource, things may be screwed up.
No great shock...
RE: No great shock...
> and their products STILL won't sell...
Their low-end products seem to be selling quite well according to reports.
OS 6 *very* late?
"The next PalmSource Developer's Conference is scheduled for December 9th through December 11th in Santa Clara. We'll post more details as they become available."
-- DECEMBER?!!? So much for OS 6 being a mid-year 03 thing. Look for it in mid-year **04**!!
Meanwhile, it has been said that the next OS of PPC will be out mid-03...
...Palm: One Step Behind. As Usual.
RE: OS 6 *very* late?
-Bosco
Proud Member of the Top Non-Mods
Members: abosco and ImpReza M3
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Next Quarter?
1) Palm does additional layoffs
2) Palm lower revenue expectations
-- half of this is Palm's fault, but the other half really *is* the rotten economy.