Palm smartphone shipments drop by 30%

Palm posted a wider net loss and a drop in smartphone shipments in its fiscal first quarter. The hype surrounding the launch of the company's Pre smartphone failed to translate into positive financial results for the company, which is struggling to refresh its smartphone efforts with its new webOS operating system.

The smartphone maker reported a net loss of $164.5 million, wider than the loss of $41.9 million in the year-ago quarter. Palm posted non-GAAP revenue of $360.7 million in the quarter, down just slighly from $366.9 million in the year-ago quarter. The company said it introduced subscription accounting for its new products in the quarter.

Palm's stock was down around 4 percent following the news to around $13.82 per share.

Palm CEO Jon Rubinstein said that the company had already secured deals with new carrier partners for the company's webOS products. "Launching more products with more carriers is key to our growth strategy," he said on the company's earnings conference call. Interestingly, though not really surprisingly, Rubinstein also indicated that Palm would jettison support for Windows Mobile and all other operating systems in favor of its webOS.

Palm shipped a total of 823,000 smartphones in the quarter, up 134 percent from the 351,000 it shipped in the last quarter, but down 30 percent from the year-ago quarter. The company did not break out specific Pre sales figures, but CFO Doug Jeffries said on the conference call that the "vast majority" of smartphone activity in the quarter related to the Pre. Sprint Nextel launched the Pre June 6.

Palm is struggling to translate new product launches into success in a market that has grown intensely competitive. The company also is trying to broaden the reach of webOS devices by expanding distribution. Bell Mobility in Canada became the second carrier to launch the Pre in late August, and Palm has an eye on Europe as well, where Telefonica will launch the Pre later this year. Further, Verizon Wireless--the largest carrier in North America--has said it will launch the Pre sometime in 2010, once Sprint's exclusivity on the phone runs out. Palm recently announced that its second webOS phone, the Pixi, also would sell at Sprint later this year.

Rubinstein was asked directly how Motorola's MotoBLUR user interface compares to webOS and Palm's Synergy interface, which combines contact lists, email inboxes and messaging threads into single applications. He said that while he does not know much about MotoBLUR, "I think to build really great consumer products, you have to control the entire experience--you have to own the OS and the services around it." He added that there was more to webOS than Synergy.

Additionally, Rubinstein addressed Sprint's plan to offer the HTC Hero, and whether that would affect Palm's visibility in the marketplace. "We expect Sprint to put Pre and Pixi front and center," he said.

In a separate release, Palm announced a new common stock offering. One of the company's primary backers, Elevation Partners, is going to invest an additional $35 million.

For more:
- see this earnings release
- see this release

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Article updated Sept. 21 to correct inaccurate revenue numbers.