Palm treads water in Q4, as Pre crosses one million app mark

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Palm treads water in Q4, as Pre crosses one million app mark

By CAROLINE GABRIEL

Published: 26 June, 2009

READ MORE: Palm | Financial

With the Pre too late to save Palm, the company reported a further decline in its fiscal fourth quarter, but actually outperformed analysts' admittedly low expectations - though even with the Pre clocking up its first million downloads, the markets remain nervous about whether the smartphone can do enough to turn Palm around.

In the quarter to May 29, Palm saw revenues tumble by 70% year-on-year, to $86.8m, while its net loss more than doubled to $91.5m from $43.4m a year before (78 cents a share, though excluding charges, the loss was 40 cents. Analysts had expected an adjusted loss of 62 cents on revenues of $80.6m.)

Although smartphones have been the most buoyant segment for most mobile device makers during the economic downturn, Palm has not had a credible offering as the market endured the long wait for Pre, and its smartphone shipments fell by 62% year-on-year to 351,000 units - though this was up 6% on the third quarter. Smartphone sell-through for Q4 was 460,000 units, down 5% on Q3 and 52% on the year-ago period.

The company finished the quarter with cash of $255m, and expressed confidence that this would be sufficient to cover the costs of launching the Pre effectively beyond the US, and ensuring that Palm does not become a one-trick pony - it needs to fulfil its promise to apply webOS to a further range of devices, targeted at different markets, in order to have any hopes of scaling up and narrowing the gap with RIM and Apple. Executives said there were new products in the pipeline, but analysts have the same concerns about Palm as RIM - whether they have the ability to fund the move into mainstream consumer smartphones and take on the big five, rather than just one another; and how this shift will hit their margins, a problem already highlighted in RIM's otherwise strong quarterly results.

"The launch of Palm webOS and Palm Pre was a major milestone in Palm's transformation; we have now officially re-entered the race," said new CEO Jon Rubinstein. "We have more to accomplish, but the groundwork is laid for a very promising future here at Palm."

The first good sign is that, despite a delay in availability of the software developers' kit for webOS ,the Pre Application Catalog has still hit its first million downloads, and exclusive launch carrier Sprint is reported to have sold 150,000 Pre units, averaging six apps downloaded per device. According to Medialets, Apple hit the one million mark 17 days earlier than Palm, has 16 times more apps and was accessible by more than 26 times the number of devices than the Pre. But the average Palm user has downloaded 26 times more apps so far than the average iPhone consumer, and programs in the Catalog are attracting 16 times more downloads. The SDK will support more optimized apps and should boost the Pre's software performance further.

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