Palm Releases Shaky Preliminary Q3 Results

Palm Going All In With The Pre

• Palm, Inc. (Nasdaq:PALM) today reported preliminary results for its third quarter of fiscal year 2009, which ended Feb. 27, 2009. Palm is burning through cash, looking for more investment and further proving that unless the Pre is a major hit, the company is in trouble. I’ve said before that Palm is pushing their chips all in with their new smartphone; the below report further explains it. Palm will report its complete third-quarter fiscal year 2009 financial results on Thursday, March 19, 2009, and will host a conference call to review the complete financial results beginning at 1:30 p.m.

The company announced that it expects to report revenues for the third quarter of fiscal year 2009 in the range of $85 million to $90 million. The revenue declines vs. the company’s second quarter of fiscal year 2009 and third quarter of fiscal year 2008 are the result of reduced demand for Palm’s maturing legacy smartphone products, the challenging economic environment and later-than-expected shipments of the Treo(TM) Pro in the United States. The company expects declining revenues and continued margin pressure from its legacy product lines in the fiscal fourth quarter.
“The much-anticipated launch of the Palm^(R) Pre(TM) remains on track for the first half of calendar year 2009, but as expected we’ve got a difficult transition period to work through,” said Palm President and Chief Executive Officer Ed Colligan. “Despite the challenging market environment, the extraordinary response to the Palm Pre and the new Palm webOS(TM) reaffirms our confidence in our long-term prospects and our ability to reestablish Palm as the leading innovator in the growing smartphone market.”

Palm stated that cash used in operations for the quarter is expected to be between $95 million and $100 million. The company’s cash, cash equivalents and short-term investments balance is expected to be between $215 million and $220 million at the end of the third quarter.

Although Palm believes it has sufficient cash, cash equivalents and short-term investments to meet its working capital needs under its current operating plan, the company intends to strengthen its working capital position given the challenging economic environment and the opportunity to drive both the launch of the Palm Pre and future product-development efforts. The company is currently evaluating options in this regard, including the exercise of its right to direct the remarketing of a portion of the common shares underlying the Series C preferred stock and warrant units owned by Elevation Partners. Palm is entitled to retain any net profits realized from such remarketing.