Report: Beleaguered Palm axing jobs due to disappointing ‘Pre’ sales

“Palm is engaging in a fresh round of job cuts due to disappointing sales of the Pre, according to a pair of assertions made today,” Electronista reports.

“One tip has the smartphone creator laying off some staff within the US. Numbers and the particular divisions affected aren’t mentioned by CoolSmartphone; the move is only known to be prompted by ‘restructuring,'” Electronista reports.

Full article here.

Gerard Hallaren, a Managing Partner of TownHall Investment Research, reports for Seeking Alpha, “Since Palm reported its August quarter losses, we have been perplexed by a disconnect between PALM’s device units sold and our estimates of store level sell through. According to PALM’s reported sell through, inventory increased by 13k units and since the ‘vast majority’ of both the device units shipped and the device units sold were units of the Pre, there couldn’t be an inventory problem. The gap between the two is only 13k. However, since the company recognizes revenue on sell in to the channel and the company defines device units sold as units that have been shipped from Sprint (their primary customer) to either customers or second tier distributors, PALM could offer investors a high number of units shipped but still have a glut of inventory in the channel. We believe that channel inventory is currently about 11 weeks, which we believe will pressure reorder rates and make it more difficult to sell high ASP products going forward.”

Halleren reports, “Sprint’s acts as PALM’s sole distributor in the United States accounting for 85% of revenue. Each of the second tier distributors such as Best Buy or Amazon.com buys inventory from Sprint rather than from PALM. PALM is accounting for this as devices sold. This does not appear to be understood by investors… We believe this means to PALM is that there is a glut of inventory in the channel that will prevent reorders from existing customers in the United States, reduced expectations for future carrier partnerships and if there is price protection or the ability for customers to return merchandise, potentially a large write off coming. At the very least, we believe that break even in 2H10 is in jeopardy.”

“Our best information says Sprint activated a little less than 375,000 Palm Pres as of the end of August. This left about 275,000 or 11 weeks of Palm Pres in ‘Sprint channels’ at the end of August. This is not to say Sprint is carrying 100% of the cost of these phones. Best Buy, Radio Shack, Walmart, Amazon and Letstalk.com are all likely carrying some of this inventory cost. How much we do not know. What these dealers’ return rights, price protection, rebates or other incentives are we also do not know. These dealer terms and conditions vary greatly with the phones,” Halleren reports. “However, the core economics around the Palm Pre’s market are slipping.”

Halleren reports, “Sprint reduced the price by 25% to $149 only 93 days after first shipping the Pre. Amazon is selling it for $99. Walmart and Letstalk.com are both offered “specials” on the Pre for is $79. While undoubtedly some expect lower prices will improve demand, we believe the lower prices are more likely to blunt some competitive impact.”

Full article here.

John Paczkowski writes for AllThingsD, “An 11-week glut of inventory in the channel? If that’s the case, it’s certainly cause for concern, more so because many investors are evidently unaware that this is even a possibility.”

“Palm and Sprint investors both might want to pay a bit more attention to Sprint’s 10-k in the future,” Paczkowski reports.

Full article here.

Jesus Diaz writes for Gizmodo, “Eleven weeks of inventory in the channel is an staggering number. If true, that may explain the fast price cuts by resellers: First a $50 discount to $150 with a rebate, then slashed to $100 in Amazon, and then the all-mighty Walmart cutting it to a ridiculous $80.”

“It will also explain Sprint CEO Dan Hesse’s less than enthusiastic comments about the Palm Pre, when he admitted in a Charlie Rose interview that the Pre couldn’t play in the same league as the iPhone, ‘the Michael Jordan’ of smartphones,” Diaz reports. “Could this be connected to the rumors about Verizon ditching the Pre? Only time will tell.”

Full article here.

MacDailyNews Take: Counting “Pre” sales, eh, Palm?

[Thanks to MacDailyNews Reader “Joe Architect” for the heads up.]

30 Comments

  1. Wow, 11 weeks, that’s almost a whole quarter’s worth of inventory. That’s almost what I would consider channel-stuffing.

    And for those who want to know about Apple, they typically keep 4 to 6 weeks of inventory in the channel, and they update the analysts on inventory levels each and every conference call.

  2. Sorry, but the people at Palm should have been looking for a new job long ago. This battle was lost to Apple long ago. Those that think differently are delusional.

    The difference in applications for the iPhone and iPod touch (and soon the Mac tablet) is about 1,000 to 1 for other (almost) smart phones. With a much smaller spread, Microsoft Windows took market share from Apples Mac 15 years ago.

    Apple is now on to the book and magazine market. What market will be next?

  3. Did you all read the number 1 and 2 positions in the AdMob stats. http://www.macrumors.com/

    “When all types of ‘handsets’ are included, Apple’s iPod touch grabs the second spot behind its iPhone sibling. While not a mobile phone, the iPod touch is included in the survey because it runs the iPhone OS and accesses the same content being served to smartphones and other handsets.”

    Why would any programer develop apps for any other device?

  4. Honestly, I hate these articles on MacDailyNews, there is nothing more pathetic than sneering at people losing their jobs, you do nothing but reinforce the idea of Mac users as condescending, patronising fanboys, you don’t need to do this.

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