Poor sales of the Palm Pre and the Palm Pixi have sent Palm Inc’s shares tumbling.
The disappointing sales emerged after Palm Inc posted its Q2 results which revealed a 59% revenue fall from last year and a fall in phone sales of 29% on the previous quarter.
Palm Inc’s shares fell 10% to $10.46 in preopen trading today.
In the quarter ended November 30, Palm posted a net loss of $81.9 million, or 54 cents a share, compared with a loss of $506.2 million, or $4.64 a share, in the same period the previous year.
Revenue totaled $78.1 million. International sales accounted for more than 10 percent of total revenue. On a non-GAAP basis, which includes revenue deferred from the sale of certain smart phone devices, the company said revenue for the quarter was $302 million.
Wall Street had predicted a much smaller loss of 32 cents per share on revenue of $266.2m.
Palm shipped 783,000 smart phones during Q2, up 41 percent year–on-year but down 5 percent from the first quarter. Phones sales fell by 4% year-on-year to 573,000 but fell 29% on the previous quarter.
The manufacturer has been hit by increasing competition from the likes of RIM and Apple in the smartphone arena. In contrast RIM reported a 59 percent increase in third-quarter income in its results this week, which it attributed to a growing consumer base and record sales of its smart phones.
Observers say Palm Inc has been too slow to broaden the availability of its smartphone range. In the US both handsets, which operate on Palm’s newly built webOS platform, are exclusive to network operator Sprint. In the UK, where the Palm Pre is exclusive to O2, sales staff are also reporting sluggish sales. The Palm Pixi is due to be launched in the UK in January.
Palm chairman and CEO Jon Rubenstein remained upbeat.
‘We're still in the early stages of a long race, and we're energized by the opportunity to compete in this exciting market. We remain confident that Palm's innovative product design capabilities, integrated cloud services and the differentiated and delightful Palm webOS experience will provide the foundation for our sustained success.’
He added that Palm's strategy of 'owning and controlling every part of the product experience including the operating system, hardware design and services infrastructure' will give it the advantage over 'those competitors who depend on others for their core software.'
However some analysts believe Palm Inc needs to adopt a more radical strategy.
Jon Delaney of IDC told Mobile: ‘These Q2 results were pretty much make or break time for Palm - this should be the last shot by Palm at a device which has its own platform on it. Palm needs to start looking at developing devices using existing platforms – maybe even Android. It is a leading handset maker which has tried to hang on to the hardware and software but it really needs to focus on the hardware.’