Beleaguered Palm’s Pre fails to staunch the bleeding

Beleaguered Palm “reported its fiscal first-quarter loss nearly quadrupled because it deferred much of the revenue from Pre sales — projected lower sales in the current period than Wall Street expected. Analysts cited factors that include stiff competition as well as a limited number of sales partners among carriers,” Yukari Iwatani Kane and Roger Cheng report for The Wall Street Journal.

“The latest quarter, which ended Aug. 28, was the first full period to reflect sales of the Pre, which was launched June 6 and is based on a new operating system called webOS. Analysts consider the device to be a make-or-break product as the unprofitable company battles rivals such as BlackBerry maker Research In Motion Ltd. and iPhone manufacturer Apple Inc.,” Kane and Cheng report.

“Palm didn’t break out sales figures for the device, but said it shipped 823,000 smart phones during the quarter, down 30% from a year earlier but more than double the number in the prior period,” Kane and Cheng report. “Analysts estimate the company sold about 500,000 Pre units in the first quarter, about in line or slightly lower than what many had expected.”

MacDailyNews Note: Apple sold over one million iPhone 3GS units in its first 3 days of availability (June 19-21).

Kane and Cheng report, “Palm books revenue from the Pre over 24 months, the estimated period of use for the device. Without that revenue deferral, the company’s loss was narrower than Wall Street expected. But Palm said it expected revenue in the current quarter to be between $240 million and $270 million, compared with Wall Street expectations of about $344 million.”

“‘The weaker projection suggests the momentum for the Pre is turning down,’ said Ilya Grozovsky, an analyst at Morgan Joseph,” Kane and Cheng report. “Palm’s U.S. sales partner has been Sprint Nextel Corp.; earlier this month, Palm cut the Pre’s price by $50 to $149.99 with a two-year service agreement with the carrier.”

Kane and Cheng report, “Apple reported a quadrupling of iPhone revenue in its third quarter ended June 27.”

“For the quarter, Palm reported a loss of $164.5 million, or $1.17 a share, compared with a loss of $41.9 million, or 39 cents a share, a year earlier. Palm also said Thursday it planned to sell 16 million shares of common stock, in a move to bolster its cash reserves, which were $211.8 million at the end of August. Palm shares fell 3% to $14.01 in after-hours trading.,” Kane and Cheng report. “‘They’re doing it because they need the money,’ said Ed Snyder, an analyst at Charter Equity Research. ‘That’s not good.'”

Full article here.