Palm Continues to Suffer (PALM, AAPL, GOOG, RIMM)
Palm Inc. reported earnings after the close today, and what they reported wasn’t pretty. Expectations were for a loss of $.42 per share on revenue of $316.19 mm. Reported numbers were $366 mm, which was actually higher than expectation, and a loss of $.61 per share, which was not. After being up by about 5% during the day on a lot of short covering, the stock tumbled on the news in after hours by over 13%.
Adding to the woes are increasing inventories at the carriers. This is an issue because Palm records sales when the products are shipped to the carriers, not when they are actually sold to consumers. Thus, large stocks of unsold inventory will prevent Palm from recording much in the way of sales until that backlog is cleared. Thus, Palm issued revenue guidance for the upcoming quarter that is half of the $305.77 mm that analysts were expecting.
My Palm article in September hypothesized that the stock (then at 17.40) would drop as consumer adoption of the new operating system would lag. Back then, Palm was shipping over 800,000 units per quarter, that number has since increased to over 900,000 but sell through to customers has decreased to 400,000 units. The stock in after hours dropped to below $5 as the long term survivability of Palm remains in doubt while they try to compete against the mighty Apple, Google and RIMM.
Disclosure: Long GOOG, no position in any other stock mentioned