Palm’s New OS Plans and Apple Poaching

In my last post on Palm, Inc. (Nasdaq:PALM), I had said that 2008 would be a breakthrough year for Palm’s turnaround, as Jon Rubinstein works through a new product cycle to resuscitate the company.

Centro is doing well for Palm, but financially, it is still a challenge because of its low margins. In fact, it has been selling more than 30,000 units a week with Sprint (S) and it recently added AT&T (T) as a carrier that should further boost its sales volume. For Q3 fiscal 2008, Centro helped the smartphone sell-through reach a high of 833,000 units, up 13% y-o-y. Check out my interview with Eric Benhamou in which I discussed Palm’s turnaround challenges. Other relevant posts are available here, and here.

According to its financial results that were reported on March 20, Palm’s total revenue in the third quarter was $312.1 million, which is down around 11% q-o-q mainly due to the declining handheld business, and the lack of any star high-end product. Net loss was $31.5 million, or $0.30 per diluted share, which included restructuring charges of $12.3 million. Last year, net income was $11.8 million, or $0.11 per diluted share.

Smartphone revenue was $275.4 million or 88% revenue. Smartphone ASPs declined to $331 per unit as a result of the product mix shifting toward the lower margin Centro. It expects the ASP decline to continue in the next quarter. But by first half of the next fiscal year, it expects ASPs to rebound with the revamp of its Windows Mobile high end enterprise phones later this year. Its high end line badly needs a revamp to compete with Apple’s (AAPL) iPhone and Research In Motion’s (RIMM) Blackberry.

But what could really make or break its turnaround is its new OS platform that is expected to release by the end of the year. Products based on the new OS would be released next year. The game in smartphones have shifted from hardware to software, and Palm’s proprietary OS has been stuck in the middle ages for a long time, while Apple has leaped forward with the iPhone.

On the personnel side, Jon Rubinstein has pulled in Mike Bell as SVP of product development. Bell was previously at Apple. Interested observers are eagerly awaiting for some magic here!

Palm’s stock is trading around $5, and its market cap is around $563 million. It hit a 52-week low of $4.21 on Monday, March 24. In my opinion, the current revenue and stock price are pretty much immaterial, since the time for Palm to show real results has not yet come. Q4 2008 and Q1 2009 would be the time for real action.

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Comments

[Figment]

Palm is a dead man limping.

[HermanManfred]

> ...On the personnel side, Jon Rubinstein has pulled in
> Mike Bell as SVP of product development. Bell was previously
> at Apple...

This is an oft-repeated statement from the Me-Too Media yet nowhere can be found the answer to the question:

>>> When did Mike Bell stop working at Apple?

Because, as we know, JR "left" Apple LONG before he joined Palm, thus certainly was NOT "poached" from Apple.

[Jon T]

The new OS will undoubtedly be a work in progress through 2009...

[iWill]

What info is there about this new OS? Unless there is some serious magic in there, they'll have trouble stealing ANY attention away from Android and iPhone.

[F. J. Taylor]

Ho-hum. Another day, another iPhone killer...

Palm is SO 90s. Apple iPhone is where it's at.

I have only been holding back until they opened the platform (done the other day with SDK), added 3G and a few other features more memory, etc., (coming this summer), and a few other aspects were addressed. I am still hoping that either they will add on some other providers than AT&T or open it up for all comers (unlikely), but after seeing my son's unit the other day, it is going to be damned hard to wait a lot longer.
This is the item I have been waiting for since Palm bought and then scuttled the Mac-compliant Treo.

Lots of businesses were doing that in the 90s - snubbing Mac. I warned them then that it would bite them in the butt, and now it has.
iPod and iTunes rule and are bringing in thousands of new Macophiles
and since Vista stinks even more than most MS dreck, and is doing an excellent job of recruiting people to Apple (thanks, Vista!), people are finally waking up to the world of easy, fun, stable and powerful computing that is Apple.

Palm is history - and good riddance.

[tom1234]

yea --i bought a palm back in the day ---it was good then ---now we have the state of the art---- IPHONE-----please file palm in the historical file under evolution of wireless phones next to the old brick mot phone

[DaveRensberger]

Palm has been talking about a more modern OS for about 6 years now.

It would be a wonderful idea to take the Palm UI and graft it onto a modern OS (like Linux) similar to the way that Apple grafted something similar to their traditional UI onto a more modern NextStep/BSD based core.

The difference between Apple and Palm, however, is that Apple is lead by a talented group of visionaries who knew how to make this happen. Palm, on the other hand, is infested by ex-3Com management whose arrogance far outweighs their talent or effectiveness. It's pretty extraordinary that they were able to take something as terrific as Palm once was and completely ruin it.