Palm's smartphone shipments jump 41%, but losses continue

Palm's smartphone shipments shot up in its fiscal second quarter, but it continued to post losses. Even as more carriers around the world begin selling its webOS devices, the smartphone maker was unable to translate that into quarter-over-quarter growth in smartphone shipments.

The company reported a net loss of $81.9 million, significantly smaller than its $506.2 million loss in the year-ago period, when it was hit by tax-related charges. Palm posted revenue of $78.1 million, down 59 percent from $191.6 million in the year-ago quarter. However, on a non-GAAP basis, which includes revenue deferred from the sale of its webOS phones, the Pre and the Pixi, Palm said revenue came in at $302 million. 

The company shipped 783,000 smartphone units during the quarter, a 5 percent drop from the 823,000 it shipped in the previous quarter, but up 41 percent from the 599,000 it shipped in the year-ago quarter. Actual smartphone sell-through, however, fell 29 percent from the previous quarter and 4 percent year-over-year.

Palm CEO Jon Rubinstein said the company plans to aggressively increase its marketing efforts. "We need to work very hard to get the word out and get people to understand why our products are better than the competition's," he said on the company's earnings conference call. 

Ahead of the company's earnings announcement, analysts speculated about Palm's plans for the new year, and in particular, whether it would reveal a new phone at the Consumer Electronics Show in Las Vegas next month. Last year, Palm unveiled the Pre and webOS at the show, and analysts expect Palm to formally announce its partnership with Verizon Wireless at the trade show; currently, Sprint Nextel is the sole carrier for Palm's two webOS devices in the United States.

Analysts said they were looking for new developments in the new year--particularly new carrier relationships--as a way to gauge the company's prospects. "While management maintained the fiscal year 2010 revenue guide at $1.6-1.8 billion supported by new carrier launches, achieving guidance may prove more challenging given Palm's channel inventory and limited sell-through benefit despite increased marketing in the quarter," UBS analyst Maynard Um said in a research note. "It remains to be seen how aggressively new carrier(s) might push Palm and we would wait for better visibility to execution, sustained end demand and profitability to get more constructive."

Others expressed impatience with the company's strategy so far. "Number one, when do they sign more carriers beyond Sprint here in the U.S?" said Shaw Wu, an analyst at Kaufman Bros., told Reuters. "At what time can they leverage their spending?"

For more:
- see this release
- see this Reuters article
- see this Reuters article

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