Tech Check

Palm Resumes Chinese Manufacturing

Palm Pre

Three weeks after confirming that its Chinese manufacturing partners had suspended production of the Pre and Pre-Plus, it appears Palm is back on track.

Curiously, and despite the controversy surrounding the manufacturing suspension, Palm didn't formally announce that production has resumed. Instead, the news was disclosed on the personal blog of Palm's vice president of communications, responding to a purported query from a reader.

"I haven't seen a press release regarding manufacturing. Has it started up again?" the reader asks? Palm's vice president of corporate communications Lynn Fox responds: "Yes. We started the line back up at the end of February." Another post asks, "If the production lines have been restarted, why not formally announce it?" Fox responds, "That is not the sort of thing a company announces." Is the query real? Or was this Palm's strange way of getting the news out without issuing a formal press release? Inquiring minds want to know.

Either way, given the drubbing Palm shares have suffered over the past week, and the controversial nature of the original manufacturing shutdown, you'd think a resumption of production is precisely the kind of thing a company in Palm's dire situation would want to call attention to.

And far more formally than something in a personal blog post.

As I wrote in an earlier post, Palm claimed a few weeks ago that a manufacturing shutdown was connected largely to the onset of the Chinese New Year. But instead of the traditional week off of work, Palm would shut its lines down for the rest of February. And then, just a couple of weeks later, Palm pre-announced its earnings with a dramatic revenue shortfall not just in the current quarter but for all of fiscal 2010. That led analysts to question Palm's credibility, wondering whether the Chinese New Year excuse was more ruse than reality as a reason for the manufacturing suspension. Further, a Palm source confirmed to me that the company was fully aware of its US carrier partners' plans, including those of Verizon and Sprint, to stop ordering new handsets because of a drop-off in consumer demand.

Palm shares were trading north of $13 in January, north of $9 last week, and now around $6. This is a stock that needs all the help it can get. A manufacturing announcement certainly could have been helpful to shareholders.

I asked Fox about the manufacturing news, and she responded: "Yes, I can confirm that manufacturing is back up and running." When I asked why there was no formal announcement, she answered: "It is not standard business practice for us to announce our production cycles or other internal operations. When we confirmed that we had ramped production down for Chinese New Year, we were responding to rumors about the motivations behind stopping production."

I think once the company confirmed the stoppage, it could have easily made the case to eschew "standard business practice" and announced the resumption.

Either way, for the Palm faithful looking for a hint of good news, there you go! Convoluted as it might be.

Questions?  Comments?