Palm announces first quarter results: $164.5m net loss, 823k phones sold
By Nilay Patel 
posted September 17th 2009 4:51PM
posted September 17th 2009 4:51PM
Palm just announced its first quarter results -- the first to really include numbers from the Pre -- and they're positive (well, depending on how you look at things), with a $2.8m gross profit on $68m in revenue. Actually, that's a little low, since Palm uses the same sort of subscription accounting for the Pre as Apple does for the iPhone, so the unofficial numbers are higher: $100.6m gross profit on $360.7m in revenue. Still, we should point out that according to GAAP (you know, the rules that matter), the outfit had a net loss in fiscal Q1 2010 of $164.5 million, while the non-GAAP net loss was pegged at $13.6 million. Although Palm wouldn't include break out specific sales data, they did say that the "vast majority" of the 823,000 phones they sold in Q1 were Pres, so take that as you will. Oh, and if you were still holding out hope for more Palm WinMo phones, it's all over -- Palm is doing 100 percent webOS development from now on. (Shocker!).Update 1: Rubinstein deftly sidestepped the question of why Pixi was launched on Sprint as opposed to another carrier, saying "They're a great partner and we're looking forward to a great holiday season."
Update 2: Asked about MOTOBLUR, Jon said "I don't know much about MOTOBLUR, but I think to build really great products, you have to control the entire experience -- you have to own the OS and the services around it."
Update 3: Jon just said "We're on a web schedule with updates -- you'll see a steady stream of updates and features."
Update 4: Revenue on accessories and anciliary products were "really very small, immaterial to overall trends." When pressed if it was in the low, single-digit millions, CFO Doug Jeffries emphasized, "very, very small."
Good to see Palm is making a come back. Might be slowly, but it is definitely one that should not leave the game.
Profit is profit...
Palm continues to lost money, not profit. Read it carefully.
http://sanjose.bizjournals.com/sanjose/stories/2009/09/14/daily86.html?ana=yfcpc
Rob, maybe you should red your comments before posting eh?
@Joseph
O the iron....
Sh*t! Irony!
I love this from the palm press release:
"To facilitate comparisons to Palm's historical results, Palm has included non-GAAP adjusted measures, which exclude the impact of subscription accounting... The company believes this information will help investors better evaluate its current period performance and trends in its business."
Oh yes, I agree. Recording liabilities as revenue is helpful to investors. Oh wait, no it's not.
The non GAAP report still showed a net loss of 164mil.
I meant GAAP, not non GAAP.... whoops...
They getting some more cash from Bono and the boys.
Bono and the boys? Aren't they RIM now?
I just started to learn how to read these, so correct me if I'm wrong, but:
Gross Profit is NOT $2.8m, it's close to $160m. Net Income, however, is close to $-732m. Revenues were $736m.
It's hard to get past the fact that they have a $264m operating loss that persists from last year.
confirm/deny
Also, they have nearly as many current debts as they have liquid assets, and they're burning through cash like it's going out of style.
@Dan,
the 2.8 million number they are talking about is gross profit.
Unfortunately, I think Engadget missed the parentheses around the number, meaning its a LOSS of 2.8 million, actually -$2,784,000. If you check the charts, its a bit clearer.
My bad, I was looking at the 2009 10-K. So I guess they're STILL burning through cash like it's going out of style. Actually, in the '09 10-K they pretty much say that the drop in profits since '08 has been the result of "declining demand for maturing smart phone lines", and that while they anticipate being liquid for at least 12 months, they didn't know 12 months ago that they'd be taking quite such a huge hit. Possibly they're just taking the opportunity to unload all their bad assets now, though, so that when the Pre really gets traction (especially with the new subscription-based revenues) they'll start announcing enormous income.
So either they're really getting hit hard by a slowing market or they're masking their modest gains while they prepare for a huge success in the near future.
engadget, you know results weren't that rosy....they actually guided down estimates for 2Q and don't expect a REAL profit till the end of 2010.
how much have they spent advertising on your site? i know it was $75k just to talk about the pre on jimmy fallan.
please try to be honest.
JUST like they're not as rosy as may seem for Apple's results - but you dont whine then do you?
What does Apple have to do with this?
@cw
You have a point. Palm didn't even disclose the Pre sales number. In the investment world, that translates to
bad sales number. No other way to describe it. Palm is selling another 16 million shares to raise capital to
stay alive for another 6 months. Time will tell how long Palm will live.
Whether it's Apple or any other company - the "figures" are presented in whatever way shows the company off on the best foot.
Apple was just an easy comparison because they do the same "use whatever numbers seem best" for their reports.
Apps sold (include updates?)
here's a good one - App store customers (ie. lets include all those ipod touches in our iphone presentations!)
iPhones sold (same 200,000 people buying every release? returns?)
iPhone Marketshare? (oh yeah - the rest of the world isnt a market.... lets just use the US numbers)
OS comparisons - oh yeah - we only use US numbers - other countries dont count here either....
Marketing and presentation mean alot - you wont find a single company that shows off it's numbers without some sort of 'spin' to deem it positive
engadget, thanks for correcting the headline....though you might want to mention you updated it.
I am not sure where you went to business school, but it seems to me like these numbers beat the analyst estimate by quite a bit (-10 cents EPS compared to -20). Also, where Engadet receives advertising revenue from has no impact on your arguement what so ever.
All in all, it seems rosy to me.
Sequioa, this bit about not disclosing sales numbers, it looks like 820k phones with the majority being pre sales would make it at absolute least 410k (I am assuming more). Analyst estimates ranged from 300-500k pre units sold. In the real investment world this translates to sales inline with analyst estimates, or better.
@Tom:
Did YOU go to business school? Beating estimates < > Rosy... A loss is a loss... a NINTH STRAIGHT LOSS. What does business school say about that?
Great post engadget! Keep it up. Good news about the Pre. Awesome that people were saying they haven't even sold more than 3-400,000 thousand. At this rate they will have sold well over 1,000,000 Pre's by Christmas and god knows how many Palm Pixi's it will have sold.
i somewhat agree with rubinstein on owning the entire experience.
It's a silly statement, a huge part of the phone experience relies on the operator's service, which Palm or Nokia or Apple can never have control over. And with Synergy, palm certainly don't own all of the services around it.
Yes, Palm SHOULD own the entire experience -- NOT RELYING ON APPLE'S ITUNES FOR MUSIC SYNC! BlackBerry did it, why can't Palm?
/Rubenstein is a dumbass...
"I do know that to build a really great product, you have to own the entire experience."
Sounds like he had a good teacher.
So how does iTunes syncing fit into "own[ing] the entire experience" around the Pre, Rubinstein?
@Bababooey, That's cold, yo
Those who can, do;
those who can't. teach.
"I don't know much about MOTOBLUR, but I think to build really great products, you have to control the entire experience -- you have to own the OS and the services around it."
I'm not sure there's that big of a distinction. Palm certainly didn't write all the code in WebOS. It's based upon the Linux kernel, webkit, Javascript and a bunch of other technologies they had little to no part in developing. Very much like the software running on the Cliq.
First of all, I own a Pre and love it:
"you have to control the entire experience -- you have to own the OS and the services around it."
I don't know if we have the full context of it, but that statement scares me a little.
im loving my pre too! hehe
the top half feels kinda flimsy and it does sway a little to the left or right on opening or closing. is that normal??
Yes. I think it would be more correct to say you have to "OFFER a great experience and services....". I really don't see ANY way that "control" adds anything. How would Apple be harmed by letting Jailbreakers operate without actively fighting them (Sorry to inject Apple here, but it IS the case with most data at this point)? I maintain they would be helped by letting that community flourish. The average Joe can stay away if he wants and be happy with Apple's experience, but the more adventurous should be unhindered. That would provide Apple or Palm with a great proving ground for new ideas. Of course we won't need to wonder for very long to see who is right. If I'm right and Rubinstein/Jobs isn't, then Android will prove the case.
BTW, maybe THAT's why we didn't see Steve Jobs for those months, Rubinstein and Jobs are really the SAME GUY!!!
The Pre is a fantastic phone and I think once it makes it way to other carriers it will do extremely well.
CNET calls it differently; (which I beleive)
http://news.cnet.com/8301-30686_3-10356044-266.html
Sales of the Pre helped boost Palm's smartphone sales in the fiscal first quarter of 2010 by about 134 percent compared to the previous quarter, but the company still reported its eighth consecutive quarter of loss and sales dipped over 80 percent.
The Palm Pre available exclusively through Sprint Nextel, is gaining traction. The company sold 823,000 smartphones in the fourth quarter, of which many are believed to be the Pre.
But even though sales of the Palm Pre were strong, Palm still ended up losing $164.5 million, or $1.17 per share in its fiscal first quarter, which ended Aug. 31. A year ago, the company reported it lost $41.9 million. Sales fell to $68 million, missing analysts' forecasts between $291 million and $297 million.
Palm has struggled to regain footing after losing market share over the last couple of years to companies like Apple with its iPhone and Research In Motion with BlackBerry devices. The Pre has been as the company's last hope at getting back in the game.
I think its an issue of parentheses, MrWhite.
I think the problem is that while the Pre itself is profitable and selling well, Palm OS Treo sales basically fell off a cliff.
As they should since nobody in their right mind should be buying a Treo 755p or Centro now unless they're serious masochists.
Nilay, are you sure those are profits being reported, not losses?
I assume the conflicting reports are due to it being a gross profit, and a net loss.
I call it like I see it.
Update 2: Asked about MOTOBLUR, Jon said "I don't know much about MOTOBLUR, but I think to build really great products, you have to control the entire experience -- you have to own the OS and the services around it."
Sounds like another company I know of...
Weird that this article states that they made a profit when the four other articles I've read today all say that Palm reported a $165 million loss for the quarter and a loss of around 80% in sales overall compared to previous years. So, which is it? One way they actually pull through and make a come back, the other way I really don't see them being able to recover from the downward spiral they are in.
I would tend to beleive the other 4
Gross Profit and Net Income are two different things. Gross Profit only factors in the Cost of Goods Sold (i.e. Direct Materials, Direct Labor, and OH). Net income factors in administrative costs, and other non-manufacturing related costs. This is what is causing the apparent discrepancy. It is very plausible (and likely) to have a gross profit, but a net loss.
Actually, the original Engadget post did not mention losses at all-it was edited at some point, including the headline.
Headline change FTW, lol
Getting a respectable ROI takes time. it wont happen over night or after just one quarter
It did for Apple, lol sorry had to throw that in there.