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Friday, February 26, 2010

Palm Sales Flatter Than Expected - Carriers Put Hold On Orders

According to the Wall Street Journal Blog, Palm CEO Jon Rubinstein has sent a memo to employees regarding lower than forecast sales and as the result a freeze on orders from some of it's carrier partners. This is apparently the memo:

This morning we announced preliminary results for our 2010 third quarter. Since the quarter has not yet closed, it is too soon to offer exact numbers, but we stated that we expect to report revenues for Q3 between $300 and $320 million. We also announced that we expect our revenue for this fiscal year to fall below the guidance we gave to Wall Street, which ranged from $1.6 to $1.8 billion. As we mentioned in our press release, our softer than expected performance is due to slower than expected customer adoption of our products, which in turn has prompted our U.S. carrier partners to put additional orders on hold for the time being. On a positive note, we expect to exit the quarter with over $500 million in cash on our balance sheet. We’re scheduled to announce our full financial results in March.

I realize this news is difficult to swallow. We made this announcement today to prevent a surprise for Wall Street when we announce quarterly earnings in March. In the meantime, the entire executive team has been working extremely hard to improve product performance, and have implemented a number of initiatives to increase awareness and drive sales.

Dave Whalen and I just returned from a very successful meeting with Verizon Wireless, where they acknowledged that their execution of our launch was below expectations and recommitted to working with us to improve sales. To accelerate sales, we initiated Project JumpStart nearly three weeks ago. Since then, nearly two hundred Palm Brand Ambassadors, supplemented by Palm employees from Sunnyvale, have been training Verizon sales reps across the U.S. on our products. Early results from the stores have already shown improvement on product knowledge and sales week over week. You may have also seen a growing number of Palm ads on billboards, bus shelters, buses, and subway stations—all getting the word out about Palm.

All of these efforts are examples of how we are working to accelerate adoption and grow distribution of webOS. In the next few weeks, your management will work with you to make sure your priorities are laser-focused, primarily on helping to increase sales, improve product quality and differentiate the Palm product experience.

Our goals are taking longer than expected to achieve, but I am still confident that our talented team has what it takes to get the job done.

We’ll schedule an all-hands meeting after our earnings announcement in March, and I’ll be happy to answer your questions.

Go team!!!
While I've heard good things about the Palm Pre, and a friend who uses one is quite smitten with his, I've been wary of recommending it to those inclined to ask my opinion. The reason being that this appears to be a last ditch effort for Palm, one that may or may not bring the company out of the shadow of the larger players. If it were unsuccessful, as it appears may be the case, where does that leave the consumer and for that matter the developers of apps. Secondly Palm is late to the game, a one time leader in the market, Palm has much time to make up and apps are slow to appear, again perhaps because of lack of consumer interest and therefore lack of developer interest. Competition is a good thing, and I hope that Palm is able to turn sales around, the question is can it be done soon enough to grab enough interest and make Palm a player again?