Palm Inc. released their third-quarter revenue today for the period ended Feb. 27, and it doesn't look great for the company behind the highly anticipated webOS Pre handset. InformationWeek reports that Palm revenue was in the ballpark of $85-90 million, a huge drop from the $150 million expected on Wall Street.
Several reasons were given for the poor showing, including the tough economic times, further delays of the Treo Pro handset, and ironically, a self-inflicted wound from the high anticipation for the Palm Pre. Bloomberg also reported on the release, with Boston analyst Matt Thornton stating: "The fiscal 2010 sales assumptions were going to be low for the Treo or Centro, now they are going to be even lower...Everyone's waiting for the Pre."
With no new devices as of late, Palm is banking on the Pre for a big showing on release. CEO Ed Colligan issued a statement soon after the news:
The much-anticipated launch of the Palm Pre remains on track for the first half of calendar year 2009, but as expected we’ve got a difficult transition period to work through. Despite the challenging market environment, the extraordinary response to the Palm Pre and the new Palm webOS reaffirms our confidence in our long-term prospects and our ability to reestablish Palm as the leading innovator in the growing smartphone market.
Quarterly spending used for operations came in at between $95-100 million, leaving about $215-220 million for operations, including the release of the Pre. Palm is considering raising more money to help drive the launch of the Pre and webOS.
Barron's reports that after the news, Palm is down 10.2% to $6.63 in late trading today. Looking ahead, Palm has decided that revenue from the Pre and future webOS products will be recognized over a 24-month time period, reflecting periodical new software features offered free of charge. This is the same way as how Apple recognizes revenue for their iPhone. MarketWatch adds that as a result, Palm said it is evaluating options, including its right to direct the remarketing of warrant units owned by Elevation Partners, who took an ownership stake in Palm in 2007.
In recent times, Palm has traded at a high of $9.51 on Feb. 13, with analysts pinning it with targets as high as $11. The announcement of the Pre at CES in January had surged stocks up 81%, after six straight quarterly losses.
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