Earnings Preview: Palm

Palm (PALM) is expected to report Q4 earnings after the market close on Thursday, June 25, with a conference call scheduled for 4:30 pm ET.

Guidance

The consensus estimate is (62c) for EPS and $80.64M for revenue, according to First Call.

Analyst Views

Palm shares are up over 350% this year, since the January debut of the Pre smartphone. However, the actual results for the period are likely to look bleak as the launch of the popular Pre isn't expected to add to the bottom line for Q4. Palm brought the Pre to market on June 6, a week after the close of the company's Q4. However, analysts believe that pre-sales of the new device may help boost the company's cash levels in Q4. So, while the GAAP numbers may look bad, most investors will focus on the Pre cash numbers and number of Pre units sold and indications of what the company expects for Q1.

RBC analyst Mark Abramsky estimates that Palm has sold 150,000 Pre handsets to date and predicts it will sell 4.1M in FY10 and 6.5M in FY11.

Credit Suisse analyst Deepak Sitaramaneven is even more optimistic, seeing 7.7M Pres sold in 2010. “The successful launch of the Pre at Sprint Nextel (S) has raised carrier interest given Palm now offers a credible alternative to Apple's (AAPL) iPhone,” Sitaramaneven wrote. “We believe this will drive top-line growth of 144% in CY10.”

Deutsche Bank's Jonathan Goldberg and other analysts believe the Pre managed to pre-sell as many as 50,000 units during the month of May before the launch. Palm is also expected to introduce a new accounting mechanism for the quarter, spreading out the recognition of revenue on the Pre over a two-year period, similar to what Apple has done for its iPhone. The main driver for Q4 is expected to have been the Treo Pro, which launched at Sprint and Alltel (AT) during the period.

The bear on the stock, S&P’s analyst James Moorman, repeated his Strong Sell rating Wednesday, expecting the company to post $115M in revenue and (62c). Moorman said,

“While we believe the Pre launch did relatively well, we remain concerned the company may have left sales on the table given supply constraints... These might be difficult to capture due to continued new product launches from competitors, as we expect additional smartphone announcements."