Palm CEO Discusses Objectives and Obstacles in Europe (PALM)

| About: Palm, Inc. (PALM)

On Palm's (PALM) Fiscal 4Q conference call, Palm CEO Ed Colligan states objectives to expand in Europe despite restrictions on the 650p and 700p units:

Ed Colligan, President and CEO
Europe is our next target geography for expansion, because it has grown to be a larger market for business oriented SmartPhones as the United States or larger. We’ve used the last year to focus on carriers, realign our European sales and marketing effort, and also consolidate our distribution partners. We opened a staff and engineering center in Dublin, and it is aligned to support European carriers in areas such as the development of 3G UMTS, and user applications focused on European local markets. Even more important, we specifically re-engineered our product road map to address what European customers and European carriers want. These efforts have positioned Palm for success in Europe, and to become a significant player on the world stage. Execution of our EMEA strategy will begin to deliver revenue growth, I believe, in the first half of fiscal year 2007 …

James Faucett – Pacific Crest
... I just wanted to go back to the issue on the 650P. Can you just clarify … about not being able to ship that because of a regulatory issue?

Ed Colligan
James, there’s a regulatory requirement that is about lead content in the products, and that requirement has been coming for a while and there are a number of companies. I will tell you, a broad range of our products that we’re shipping into Europe are compliant with that, and will be going forward.

This particular unit that we’re shipping there, about nine months ago when we had to make the decision whether we’re going to transition the whole product line over to that, we made the decision that we weren’t going to do that with this particular product.
Obviously we hoped at that time that we might be in a little better position to ship other products into Europe at this point. We’re reasonably close to that, but it’s likely not going to happen this quarter. Therefore it’s affecting our guidance. But as you can see from the year’s guidance, we believe that the long-term trends are strong and that will be an anomaly …

James Faucette – Pacific Crest
Okay so for the months of July and August, you won’t have any real shipments into Europe?

Ed Colligan
Correct – of SmartPhones, that is correct. That’s also shipments into Europe. We’ve obviously thought about this, and tried to put some product in Europe in our various distributors and carriers such that we can continue to satisfy some end-user demand.

James Faucette – Pacific Crest
...What’s your expectation as to when you need to have a product into Europe before that supply will be exhausted?

Ed Colligan
Well, obviously, we want to do that as quickly as possible. I can’t give you a specific date for our next product launch at this time, though …

Charles Wolf – Needham & Company
…what about the 700p?

Ed Colligan
The 700p is a CDMA product, Charlie; the only reason why it can’t be sold in Europe in its current configuration. Clearly we’re working on new products that will run on GSM, UMTS style networks. Those are the products we would ship into Europe.
We made a decision a while back that this product because the volumes were not that significant in Europe on the 650, we made a decision not to do the entire transition of that product, which is complete redesign and a complete new set of components to go into it.

So we made that decision not to do it. That’s what’s happening right now. If we could ship the 700p into Europe, we’d do it in a heartbeat. Unfortunately it won’t run on those networks there.

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