Smartphone Maker Palm Inc. Fights for Survival

Smartphone maker Palm Inc. saw its stock plummet by almost 30 percent last Friday after several Wall Street analysts raised doubt about the company’s survival.
Smartphone Maker Palm Inc. Fights for Survival
A Palm Pre smart phone (Alex Wong/Getty Images)
3/22/2010
Updated:
10/1/2015
<a><img src="https://www.theepochtimes.com/assets/uploads/2015/09/cornpre88269935.jpg" alt="A Palm Pre smart phone (Alex Wong/Getty Images)" title="A Palm Pre smart phone (Alex Wong/Getty Images)" width="320" class="size-medium wp-image-1821869"/></a>
A Palm Pre smart phone (Alex Wong/Getty Images)

NEW YORK—Smartphone maker Palm Inc. saw its stock plummet by almost 30 percent last Friday after several Wall Street analysts raised doubt about the company’s survival following Palm’s announcement that it sold far fewer phones than originally anticipated.

In its latest fiscal quarter ending Feb. 26 the company said it had sold only 408,000 units of its Pre and Pixi smartphones—a drop in the ocean compared to Apple Inc., which sold 8.7 million iPhones during its first quarter.

“Our recent underperformance has been very disappointing to me personally and to the entire Palm team,” Palm CEO Jon Rubinstein said during a conference call with analysts last Thursday. Even grimmer, the company predicts that sales this quarter would be less than half of Wall Street estimates. On the conference call, Chief Financial Officer Doug Jeffries told analysts that revenues in the current quarter would be around $150 million, about half the $300 million-mark expected by analysts polled by Bloomberg.

Several analysts cut Palm’s stock outlook from “hold” to “sell,” and a few set their price forecast to zero, foreseeing bankruptcy or insolvency in the future. With lagging sales, the company has enough cash to operate through the rest of the year, analysts say.

Company executives are more upbeat, however. Rubinstein said on the call that, “We’re very realistic about our near-term challenges, but the issues we’re facing are far from insurmountable.”

According to market research firm ComScore, Palm lags behind rivals Research In Motion Ltd. (RIM) and Apple Inc. in the global smartphone race. In terms of operating systems, Palm’s 5.7 percent market share is behind Google’s Android, RIM’s BlackBerry, and the iPhone.

Palm’s latest operating system, webOS, has garnered positive reviews for its multitasking capabilities and multi-calendar support. But so far, Palm’s phone offerings are only sold at Sprint and Verizon Wireless in the United States.

Investor Support

Palm’s biggest investor, private equity company Elevation Partners, is still standing by the firm despite its troubles.

“Jon [Rubinstein] and his team have built the best mobile operating system available today and they are now working through short-term execution challenges with Elevation’s complete support,” said Elevation according to a Reuters report.

Elevation, which counts U2 lead singer Bono among its partners, bought a 25 percent stake in Palm in 2007, for $325 million. Today, the company’s stake in Palm is around 30 percent.