Palm Profits Pass Predictions; Prefers WebOS to Windows Mobile

It was a busy week for Palm; the resurgent smartphone designer both announced its Q1 2010 results and informed the world+dog that it would not support Windows Mobile in future products. The company's Q1 performance has received a bit more press than its move away from the Windows Mobile platform, and in Palm's case, the financial data is anything but clear. Palm's fiscal results for Q1 2010 are available here; the company's analyst call is transcribed after the financial data. Palm reports that it's successfully launched what it calls a "technology trifecta." The three prongs of the trident are the launch of the new Palm webOS, a new cloud services infrastructure, and, of course, the Palm Pre. Company CEO Jon Rubinstein identifies the Palm Pre as the launch product linchpin that holds the company's vision together, stating that "the Palm Pre [is] the first in what we expect to be a long line of products that deliver the compelling webOS experience to customers around the world." Palm's second webOS phone, the Palm Pixi, should be on sale from Sprint by the holiday season, and if you've wanted a Pre but not had the cash, you can buy one now at just $149 through Sprint.

Palm's GAAP-Toothed Smile:

GAAP is an acronym which stands for Generally Accepted Accounting Principles. It's a framework of rules and guidelines that governs how companies report income, expenses, revenue, debt, and costs. The purpose of using GAAP (at least in theory) is to give investors and stockholders a lens through which to view the corporation's performance. Palm is quick to note that it does not consider its non-GAAP metrics superior to GAAP, but considers "non-GAAP financial measures helpful in assessing its current financial performance, ongoing operations and prospects for the future."

The reason Palm wants to talk about non-GAAP measurements is because the figures on the company's balance sheet shift dramatically if it does. According to GAAP, Palm is not allowed to include revenue it expects to recognize from units that were shipped in the second quarter. As such, total revenue for Q1 2010 was $68 million. If Palm can count its Q2 expected sales revenue within that same period (i.e., non-GAAP), it would've reported revenue of $360.1 million. Since Palm is largely banking on the Pre to rejuvenate itself, the corporation has every reason to try and pull revenue on to the balance sheets.

The Palm Pixi:  Palm's upcoming, cost-conscious consumer model.

Palm shipped some 823,000 units in the first quarter and expects it can grow those figures by launching additional products like the Pixi as well as continuing to work on the webOS ecosystem. The handheld manufacturer's positive financial results were, in many respects, overshadowed when CFO Doug Jeffries warned about the company's Q2 performance. "Looking ahead, we expect the timing and size of product launches planned for our second quarter, coupled with lower anticipated demand for our legacy products, to yield Q2 non-GAAP revenues below the results we posted in Q1. On a non-GAAP, adjusted basis we anticipate revenues for our second fiscal quarter to be between $240 and $270 million."

Jeffries still believes Palm is on target to earn $1.6-$1.8 billion in revenue for 2010, but that'll require the company's sales (and profits) to skyrocket in Q3 and Q4.

Washing Away Windows Mobile:

When asked about Palm's OS strategy and the importance of webOS going forward, Rubinstein wasted no time backing the company's latest software platform. "Given the importance of webOS to our overall strategy, we’ve made the decision to dedicate all future development resources to the evolution of webOS, which means that going forward our roadmap will include only Palm webOS-based devices."

Future iterations of WebOS are rumored to include improved Exchange support, but the Treos and Centros currently moving through the market are the end of the line for the Palm/MS OS partnership.