Palm Lower Than Expected Earnings Report Causes Stock Drop

An earnings warning from Palm has caused a significant drop in their stock price, according to BusinessWeek.

"After providing first-quarter guidance $30 million below expectations June 29, Palm ... now expects $30 million shortfall to new guidance," wrote RBC Capital Markets analyst Mike Abramsky in a note to investors.

Palm's stock dropped 8.7 percent, down to $14.18 on the news.

While it does seem like the news is pretty bad for Palm, CEO Ed Colligan, however, pointed to a bright side of the future:

"We will soon address the market dynamics responsible for our first quarter revenue shortfall with two major product launches, one that improves our pricing position and both which extend our carrier relationships to global markets. Overall smartphone sell-through was up quarter over quarter, and our balance sheet is in excellent shape."

In an interview at MSNBC.com, as reported by Treocentral, he also had to say:

"I think you’ll also find [with] the Q enormous return rates, people that are disappointed with its usability. The only thing we can do is focus on what we do best, which is simple, fast, reliable products that people love to use. Treo users are a real dedicated bunch. If you talk to them, they will tell you why they would rather carry our products than those."

Indeed while earnings may be a down point for Palm right now, the new phones and a more open European market may give a definate shot in the arm. For the past year, Palm's major releases have been CDMA based phones, in the Treo 700w and the Treo 700p. While CDMA may be popular in the US, however, it is far less popular in Europe and the rest of the world. That alone may be a significant contribution to Palm's earnings woes. With new GSM phones coming to Europe to compete with the new phones that have debuted over there, Palm's earnings may indeed recover.

The other factor is the feature-factor. Ed Colligan is right in that returns on the Motorola Q have indeed been a sign of a good thing for technolgy as established as the Treo, but that alone is not something to base a market strategy off of. Treo needs to once again take the innovation lead in the smartphone market as numerous competators approach the smartphone space. The Q is only one of a legion of smartphones being released with as many, if not more features than current generation Treos.

Cell phones are not computers, and people will buy the one with the most appeal and usefulness to them at the time of purchase. Typically the turnaround on cell phones is lower than on computers as well, so expecting someone to hold the same cell phone for 3 or more years is becoming a very unrealistic expectation. People are demonstrating in droves that smartphones are the wave of the future, as more and more convergence is happening in the cellular space. Cameras, web access, streaming audio and video, and expansion are all vital now. The major players in the cell phone market have taken note, and are releasing direct competitors to the Treo. Palm must step up to meet, and exceed, that challenge.

via - Treobits and Treocentral