Palm needs to take drastic action. Its latest results show the beleaguered handset manufacturer is continuing to
This week Palm warned
that revenue in the current quarter ending in late May would fall to less than
£98.83m. Although up from £74.59m a year earlier, it falls far
below the £201.49m projected by analysts.
These latest results, which saw Palm's market value fall by half from the start of the year, show that, once again Palm
has failed to deliver. The question is, how long can it continue to do so?
sell-through numbers say it all. The company shipped a total of 960,000
smartphones during the third quarter, but
actual sell-through totalled just 408,000 units - nearly 200,000 handsets fewer
than analysts expected.
That Palm could get it so
wrong suggests it still hasn't grasped the need to push its products more
aggressively in a market awash with competing smartphones.
Opportunites have been lost. Despite being ahead of the
curve with its WebOS platform, Palm has failed to translate this into carrier
support and consumer demand.
Some of this failure is
down to financial constraints. As a relatively small fry in the market it has
limited funds, with no more than £85.66m in net cash to meet the increasing cost of
promoting its products. With only 1,000 employees, covering the US, Europe and beyond, it is also more than a little
Its decision to limit its devices
to exclusive deals – with Verizon and Sprint in the US and O2 in the UK – was
also a major marketing and distribution miscalculation. Wider distribution
could have made up for its limited advertising budget and may have stimulated
more aggressive selling at the point of sale.
In the meantime, the
competition continues to heat up. This is no time to stand still, with Google pushing its Android platform, RIM
punting aggressively for market share in the consumer sector, iPhone continuing
to trailblaze and Microsoft raising its game with Windows 7.
All in all the prospects
for Palm look grim, raising speculation once again that it may go private or become an acquisition target.
Likely contenders for making a move on Palm include Microsoft, Nokia and Dell Inc.
Interestingly, Palm did not dismiss the
rumours this week with Jon Rubinstein saying the board would look at any
Certainly the manufacturer
looks more appetising to potential suitors now, with its share price on Nasdaq falling
14% to just £2.64 on Thursday.
However there are signs
Palm is fighting back. The manufacturer has launched an aggressive sales
campaign in all markets, with extensive sales staff training at all points of sale.
It is also concentrating
more resources on growing its share of the enterprise sector, looking at the
SME and SOHO customers in particular.
In addition Palm is
promising a new range of handsets, which is expected to be showcased next week
at the CTIA Wireless 2010 show in Las Vegas.
However, with the poor
sales of its previous offerings, Palm’s new portfolio will have to deliver
something really big to have any hope of turning its fortunes around at this point.