Palm Disappoints, Teeters On The Brink Of Failure - HotHardware
Palm Disappoints, Teeters On The Brink Of Failure

Palm Disappoints, Teeters On The Brink Of Failure

When Palm demo'd the Pre a year ago in January, the phone was seen as the company's last chance to reverse its fortunes. Despite positive reviews and praise for the company's WebOS and Palm Pixi, the once-dominant cell phone and PDA manufacturer has continued to lose ground (and money). For Q3 2010 Palm reported a loss of $18.5 million. That's significantly better than a year ago, when the company lost $95 million, but the company's quarterly results are ominous for multiple reasons.

First off, there's an awful lot of unsold inventory building up in partner stores. Palm may have shipped 960,000 phones last quarter (up 300 percent year-on-year), but its sell-through figures were much lower at just 408,000. That's a 23 percent decrease quarter-on-quarter. Worse, Palm's fiscal Q3 covers the Christmas buying season (which may have improved sales) and the company offered special deals through the same time period.



"Our recent underperformance has been very disappointing, but the potential for Palm remains strong," said Jon Rubinstein, Palm chairman and chief executive officer. "The work we're doing to improve sales is having an impact, we're making great progress on future products, and we're looking forward to upcoming launches with new carrier partners. Most importantly, we have built a unique and highly differentiated platform in webOS, which will provide us with a considerable - and growing - advantage as we move forward."

Wall Street doesn't believe it and to be blunt, we don't either. Solid products, deep discounts, two refreshes (both the Pre and Pixi now have 'Plus' flavors), and a strong OS offering have collectively failed to ignite widespread consumer interest in the company's products. Rubinstein talks about Palm's potential remaining strong, but the company may have literally run out of time. Palm's stock was hammered after its announcement, falling 12 percent to just below $5 before the market closed on Friday. We're already seeing investor speculation that the stock could actually fall all the way to $0 as investors flee the dying company.

Palm's best bet—and maybe it's only chance to survive in any meaningful way—is to start aggressively shopping around for an interested buyer. The fact that Palm has been unable to draw support for its WebOS in the face of competition from both the iPhone and Android is more a sign of supremely bad timing than a judgment on the company's value. Hopefully the likes of Google or Nokia will make Palm an offer. Brave words aside, it's hard to envision a scenario in which Palm triumphantly returns to profitability on its own.
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Maybe they should make an Android phone =P

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I don't think they have time, even if they wanted to. Nothing personal against Palm at all, but investors clearly don't believe the company can pull itself out of this.

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I don't believe they can pull out of this one with out some pixie dust :) LOL

The palm seemed like a very interesting phone when they introduced it, I thought it would sell good but guess not.

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It is way to late for Palm. The phone market is very competitive and you got to release a product that is popular. This is like one big popularity contest. Thanks to Apple? If it is not popular and doesn't get a lot of hype, then not many people will buy it. Based off of that, no one will develop apps for it. With no good apps, it won't sell well. It is a vicious downward cycle.

For example, look at the Droid. It has better hardware in it than the iPhone, but it rely on that alone. It needs apps for one. That is why they gave them away with a free trial plan at GDC. To entice developers to make apps for it.

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I remember back in the day I was doing customer service for a large cell phone provider, and palms where the ***. I wanted one so badly, but couldn't afford it on the peanuts they paid me. Now they're going under, I honestly can't say I expected that to happen, ever.

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The oddity of the situation to me is that there's no obvious reason why the Pre and Pixi stumbled so badly. Pricing was fine, features were good, reviews were good, WebOS got good marks, etc.

By all rights, these are good products that *should* have done better...they just haven't. Hopefully potential buyers will see the two phones + OS as an example of the company's strength and experience in design and buy the company for more than just the brand. A buyout over a bankruptcy does seem to make the most sense; even if the Palm brand doesn't sparkle the way it once did it still has market recognition and value.

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Joel H:

The oddity of the situation to me is that there's no obvious reason why the Pre and Pixi stumbled so badly. Pricing was fine, features were good, reviews were good, WebOS got good marks, etc.

By all rights, these are good products that *should* have done better...they just haven't. Hopefully potential buyers will see the two phones + OS as an example of the company's strength and experience in design and buy the company for more than just the brand. A buyout over a bankruptcy does seem to make the most sense; even if the Palm brand doesn't sparkle the way it once did it still has market recognition and value.

 

Something my professor said in a management class that I think applies well for this situation.

"Anyone can make a product, but not everyone can sell it."

In other words, they couldn't market well. If you can't market well, then how is the mass consumer going to know or get excited about a product?

 

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Well firstly the Palm Pre was restricted to Sprint, which is another company that's been bleeding customers. Secondly, when they did offer it to other networks like Verizon, the timing couldn't have been worse. Motorola was already in the middle of a $100 million campaign for the Droid.

The statement by their CEO is typically what you'd expect to hear pre-bankruptcy/takeover. Anyone holding this stock should abandon ship, unless they have insider information about a possible buyout.

Anyway, Palm's stock fell 30% on Friday to $4 in aftermarket trading. And analyst target price for the stock is $0 like you mentioned Joel. Really quite embarrassing.

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Everyone I know who has one Thinks its the greatest phone in the world, UNTIL it fails!

Then you really don't hear much about it?

I always thought it was a gimmicky hybrid of a touch and the old sidekick. I guess those surrealistic commercials did a good job of making people who are drunk believe it was an Iphone :)

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Cudos to Apple and the I-Phone they really revolutionized the smart phone market with the I-phone. There have been many to try and take market share or even compete and all have been met with failure. I have to give credit where credit is due, this device (I-phone) just seems to keep the growing and no one can penetrate this market. It will be interesting to see if Microsoft can make a similar device If they can make the Zune have phone capability they might,,,,I stress might,, be able to make some headway.

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la_guy_10:

Cudos to Apple and the I-Phone they really revolutionized the smart phone market with the I-phone. There have been many to try and take market share or even compete and all have been met with failure. I have to give credit where credit is due, this device (I-phone) just seems to keep the growing and no one can penetrate this market. It will be interesting to see if Microsoft can make a similar device If they can make the Zune have phone capability they might,,,,I stress might,, be able to make some headway.

 

Why do a Zune phone when they are doing the Windows phone?

 

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It's the iPhone, not the I-phone.

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I think Palm should license WebOS to other handset manufacturers and exit the hardware business.

While they may have improved things since the first batch of Pre handsets, I know quite a few Pre owners that had fairly poor slider mechanisms. The fact that the edge of the slider was extremely sharp didn't help things either.

As a software platform, WebOS definitely holds potential, and I'd actually consider trying it if the hardware it was running on was good.

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RyuGTX you are correct bro I just realized today that they are making the Windows phone. I had seen in the past slides where Microsoft was putting phone capabilities on the the Zune, but your point is very valid.

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Palm has always had good hardware [sometimes made by HTC]. The Palm OS phones were always good, the Windows Mobile ones that they started making weren't so great. I have a feeling they are takeover bait, a company with a good product and some innovation which has money issues.

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