Palm Presses On With Mixed Earnings Report

Palm Treo Prol
Source: Palm

Palm (NASDAQ: PALM) reported better than expected revenues today of $366.9 million, above analysts’ estimates of $329.9 million, but not all was rosy given it reported a net loss of $41.9 million, representing 39 cents a share, while analysts expected a loss of 20 cents a share on revenue of 329.9 million.

Palm’s stock, which opened Thursday at $7.45 per share, closed the day at $8.49, a 17.75 percent increase. After-hours trading, however, brought the share down to $7.88, a drop of 7.18 percent.

CEO Ed Cooligan was optimistic during the earnings call, telling investors the handset maker is off to a “good start” for fiscal 2009 and that his plan focusing on people, products and platforms is “making great progress.”

“We have greatly improved while solidly in the midst of a transformation and with significant hurdles to come,” said Cooligan, adding that Palm’s new operating system platform is on target to arrive by year’s end with devices arriving in the first half of 2009. Palm would not provide specific dates on OS initiatives such as the arrival of a software developer’s toolkit or any other related activity.

Palm’s mixed financial report comes as handset makers and carriers wrestle to keep and gain market share in light of a shaky economic environment and new market entrants such as T-Mobile’s Google Android handset, which is set to debut next week.

Palm leaders pointed to both device and strategy moves in the past quarter as reasons the handset maker is making gains with smartphone users, noting the unlocked Centro, new Google map applications, and the arrival of the Treo 800W and Treo Pro — the high-end business smartphones Palm pushed out this summer.

“We have great confidence in the Treo Pro, as it’s a significant differentiator,” said Cooligan, noting that newly hired executives, the “people” aspect of the Colligan’s one-year-old plan — will help drive product strategy forward.

But both Cooligan and CFO Andy Brown acknowledged that the maturing of the Centro handset line presents a challenge, and “profits will be elusive” going forward into the next quarter.

“The next period will be undeniably difficult in the short term,” said Brown, stating revenues will be down in the second quarter of fiscal 2009 compared with the current quarter.

Palm sold 1 million devices in the first quarter, a 49 percent increase over the previous quarter that experienced a 6 percent unit sales increase. Palm reported smartphone revenues of 333.8 million with 1.2 million units sold.

Palm’s handheld product segment did not fare as well as its smartphone line. Revenue was reported at 33.1 million, with 166,000 units sold, representing a 49 percent decrease year over year from the first quarter of 2008.

Overall, though, Palm said the company is “trending in the right direction and on the right path to meet its goals.”

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