Palm's third quarter earnings report was strange. The company itself just a few weeks ago revised its revenue outlook dramatically lower, to a range of $285 million to $310 million. The company reported $366 million instead.
That's the good news.
But there's lots of bad news.
Palm's loss on the quarter hit 61 cents; the Street expected 42 cents in red ink.
Units shipped on the quarter hit 960,000, which sounds good, until you see the sell-through number which tells investors how many of those units were actually bought by consumers. That figure was only 408,000.
The Street expected sell-through in the range of 500,000 to 600,000 units.
Get after-hour quotes for Palm.
Now we know why Verizon and Sprint stopped all new orders last month. And while Palm resumed manufacturing after a 3-week shutdown in China in February, the channel seems absolutely stuffed with a whole bunch of handsets that don't seem to be selling.
BMO Capital suggested that before this quarter there were already 210,000 units already on store shelves that had yet to be sold. It appears that inventory grew dramatically during the quarter.
Reading through Palm's balance sheet, it appears the company's cash position remained stable, at around $590 million. That might be incrementally positive for Palm as it might be forced to spend more of its own money on marketing its handsets as carrier partners focus their attention on Palm's competitors.
CEO Jon Rubinstein acknowledged his disappointment with Palm's underperformance, but he says he still has faith in the company's promise. We heard much the same message from Rubinstein's predecessor Ed Colligan, and Palm delivered much the same results under his stewardship.
Palm's deep problems are well-documented, on this blog and elsewhere. Despite Rubinstein's optimism, today's report offers little of a Palm turnaround or as a viable independent competitor in the smart phone arena. Instead, it only underlines just how dire this company's business seems to be.
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