Palm: production halted due to Chinese New Year

Palm confirmed that it temporarily halted production of some of its smartphones because of the Chinese New Year, though it did not immediately disclose which smartphones had been affected.

"Palm regularly adjusts its product manufacturing levels to manage inventory," the company said in a statement. "In anticipation of the Verizon Wireless launch and Chinese New Year, we increased production levels prior to February, and anticipate ramping production back up after the Chinese New Year ends."

The confirmation followed on the heels of a report from OTR Global which, citing sources in the company's Taiwanese supply chain, said that Palm had suspended production of the Pre and Pre Plus for February. The Chinese New Year begins on Feb. 14; traditionally the celebration lasts for a full 15 days.

"Key sources in the Taiwan handset supply chain said Palm has ordered assembler Foxconn International Holdings to suspend production of both the Pre and Pre Plus in February," the OTR report said. A source told OTR the move was very sudden and that Foxconn has been ordered to reduce its February Pre forecast to zero. "The source said the CDMA2000 Pre to Sprint and the CDMA2000 Pre Plus to Verizon were affected," the report added. The OTR report said that it was unclear whether shipments will resume in March, but Palm's statement makes it clear that the production disruption is only temporary.

Verizon Wireless began selling the Pre Plus and Pixi Plus at the end of January, ending Sprint's exclusive contract with Palm. Expectations are high for the Palm-Verizon partnership--as well as for Palm's plans for the rest of the year. AT&T Mobility has said it will launch Palm devices this year.

One analyst, Jonathan Goldberg of Deutsche Bank, said earlier this month he thinks Palm can ship 600,000 webOS-based devices through Verizon this quarter. Others, however, are less enthusiastic. Piper Jaffray analyst T. Michael Walkley recently wrote in a research note that he was "slightly disappointed" with initial Palm sales at Verizon, but said a more aggressive marketing campaign could boost demand.

For more:
- see this Boy Genius Report post
- see this Barron's blog post

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Article updated Feb. 11 to include comments from Palm.