Palm CEO Envisions More Windows Devices And New Smartphones

Treo smartphone maker Palm’s (PALM) chief executive told analysts on a conference call Thursday night — after issuing a forecast below analysts’ estimates earlier in the evening — to look beyond continued declines in sales of personal organizers to a future of numerous new Palm smartphones and new kinds of computers.

“We’re in the beginning stages of one of the biggest market and growth opportunities in the history of technology,” said Ed Colligan, saying the company was “energized” by the recapitalization earlier this month by venture firm Elevation Partners.

But the disturbing part for some listeners on Thursday night’s call was a drop in Palm’s revenue from smartphones from the prior quarter — coming on the same day that competitor Research in Motion (RIMM) announced blow-out results.

Palm’s Treo smartphone sales in the quarter actually declined by 3% from the prior quarter, to $344.2 million, while sales of handheld organizers, despite declining by 40% year-over-year, were actually up slightly from the prior quarter.

When asked if the decline in Treo sales was part of a trend that might get worse in coming quarters, Colligan told analysts to focus on the 43% jump in sell-through of Treos year-over-year. While the handheld organizer business “is declining more rapidly than we thought” at the beginning of the fiscal year, smartphone sales are “healthy” in the company’s view, he said.

Colligan said that for the current quarter ending in August, competitors might make a typically slow quarter even tougher — which sounds like a veiled reference to the arrival of Apple’s (AAPL) iPhone Friday. When asked point-blank about the iPhone, Colligan said he’d never seen:

the kind of feeding frenzy we have in the media right now around anything. We expect it to be a very successful product. Certainly there will be some stall for a couple weeks while people check ‘em out. They’ll have 30 days to return [the iPhone] so we hope to benefit from that.

Palm will have “a number of new major products in 2008,” said Colligan, including a range of smartphone products to reach new demographics and expand the number of wireless carriers the company sells through. Colligan said Palm will have “major new platforms on the software and hardware front.”

“We have just thrown out the first pitch in a nine-inning game,” Colligan declared.

On the company’s maligned “Foleo” laptop-style device, Colligan said the Foleo is a smartphone companion today but will become a full-fledged computing platform for those intimidated by traditional computers, with its own dedicated applications. “Foleo has had mixed reviews from the pundits, but extremely enthusiastic response from customers,” said Colligan. “I’m completely confident we’ve redefined mobile computers.”

Colligan said the company will hand off more of the development of devices based on Microsoft’s (MSFT) Windows Mobile software to third-party manufacturers, dubbed original device makers, or ODMs, in order to expand the number of Windows-based devices the company produces. Meantime, Palm itself will focus more of its energies on designing devices using the Palm Operating system, said Colligan. The company sells “a little less than 50%” of its smartphones with Windows today, said Colligan. “We expect to continue to see growth in Windows Mobile. We think we can leverage our brand more than we have to date” with Windows Mobile using ODMs, said Colligan. Windows mobile will be particularly strong for the company going forward in international markets and for sales to large enterprise, he said.

Regarding the taking on of $400 million in debt through Elevation’s investment in the company, the company said its net debt-to-EBITDA will be less than one, making the company “extremely confident of our ability to operate in this capital structure.” That deal is expected to close in the third calendar quarter of this year, the company said.

Headcount at the end of the quarter was approximately 1,100, after eliminating about 100 jobs, the company said.

Palm shares Thursday continued to fall in after-hours trading, by as much as 71 cents, or 4.29%, to $16.56.