Cloudy skies ahead for Palm — warns of lower than expected revenue

It’s going to be a difficult year for Palm. The handset maker updated its guidance this morning to reflect lower than expected revenue for the third quarter and full fiscal year 2010. It expects third quarter revenue to be in the range of $285 and $310 million on a GAAP basis — about 30 percent less than $425.4 million analysts had been expecting (according to AllThingsDigital). Subsequently, Palm expects much lower fiscal year 2010 revenue than its initial forecast range of $1.6 to $1.8 billion.
Palm blames slow consumer adoption of its products for the poor numbers, which has led to lower than expected volume orders by carriers, as well as deferral of volume orders to later periods.
In a statement, CEO Jon Rubenstein had the following to say:
Palm webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today, and our work to evolve the platform and bring industry-leading technology to market continues. However, driving broad consumer adoption of Palm products is taking longer than we anticipated.
Our carrier partners remain committed, and we are working closely with them to increase awareness and drive sales of our differentiated Palm products.
Though Palm says its partners are committed, there has been buzz that Verizon is already considering dropping its Pre Plus and Pixi Plus phones due to poor sales. The phones hit Verizon in late January, and it certainly doesn’t bode well for Palm that Verizon may be having second thoughts after only a month.
Like many, I was disappointed by both of Palm’s recent phones. Despite the nifty additions of more RAM in the Pre Plus, and Wi-Fi support on the Pixi Plus — the phones still screamed of being minor upgrades to last year’s hardware. When Palm announced the Pre at CES 2009, there was genuine excitement surrounding the product because it was the first recent smartphone to actually best the iPhone in many ways. But that same hardware doesn’t shine as brightly now when compared to recent Android phones like the Motorola Droid or Nexus One, or even the iPhone 3GS.
I’ve always thought that 2010 was going to be a crucial year for Palm. If the company can’t bounce back this year, it won’t be able to roll out much-needed new hardware to compete with its bigger competitors, and it will likely need to find a buyer.
At the time of this post, Palm’s stock sits at $7.00 — a significant step down from its $17.75 peak last September. The company will announce the full details of its Q3 2010 earnings in a conference call on March 18.
Tags: Palm Pixi Plus, Palm Pre Plus
Companies: Palm