Palm's new smartphones fail to fuel sales

Palm is predicting revenues from its re-launched smartphone business will fall far short of earlier projections, and hopes.

Instead of fiscal year total revenue of $1.6 billion to $1.8 billion, revenues will be "well below" that forecast.

Some are already predicting this is the beginning of the end for the device maker.

In a statement today, the company said carriers were cutting or deferring orders for Palm webOS-based smartphones, such as the Pre Plus and Pixi Plus, in the face of "slower than expected consumer adoption" of the new products.

Revenues will be lower for the third quarter and for the entire fiscal year, the company said. The original Palm Pre, the first using Palm's well-regarded, innovative webOS, went on sale with Sprint last June.

Palm's webOS lives up to hype, early developers say

Palm stock plunged in response, losing $1.39 per share, or more than 17%, to $6.70. It had already taken a hit earlier in the week, in response to critical evaluations from stock analysts. Vivek Arya, analyst with Bank of America/Merrill Lynch, changed his stock rating from "buy" to "underperform", and cut his price target for the company's stock from $20 to $10. The stock had reached a high of $17.39 last September. At end of day Monday, the stock price was $9.12; by end of day Wednesday, it had dropped still further to $8.07 on heavy trading.

In the company's statement, Jon Rubinstein, Palm's chairman and CEO. said, "Our carrier partners remain committed, and we are working closely with them to increase awareness and drive sales of our differentiated Palm products."

But in his analysis, Arya wrote that the "window of opportunity may be closing" in the face of continued, growing success for Google's Android, Research in Motion's Blackberries, the Apple iPhone, and even Microsoft's retooled Windows Phone 7. Palm has only $130 million in net cash to meet extensive, increasing operating expenses, such as a new advertising program for the webOS product line. "Palm's options may be limited in our view," he wrote.

For others, the window has long since been nailed shut. "If Palm ever had a real window of opportunity--and that is certainly debatable--it is closing rapidly," writes PC World's David Coursey, in a blogpost titled "Why Palm can't be saved."

"Let me make this really clear: There is no reason for anyone to purchase a Palm smartphone that makes sense, save a few people who hate Apple, Android, and BlackBerry with equal passion. All three competitors are better choices than a Palm Pre Plus or Pixi Plus," Coursey writes.

Network World's Cool Tools Editor Keith Shaw gave a generally favorable but unenthusiastic review to the Palm Pre.

John Cox covers wireless networking and mobile computing for Network World. Twitter: RSS feed:

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This story, "Palm's new smartphones fail to fuel sales" was originally published by Network World.

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