Palm Warns Revenue Way Below Expectations

Palm, Inc. says that revenue for its last financial quarter was well below what analysts were expecting, a shortfall which it primarily blames on the current economic crisis.

The company says it took in between $190 million and $195 million last quarter, while market analysts were expecting its revenue to be around $330 million. During the same quarter of last year, Palm's revenues were close to $350 million.

Palm says it knew its revenues would be down because of "reduced demand for maturing smartphone and handheld products" but it wasn't expecting the decline to be this severe. "We are seeing unprecedented dynamics in the global markets as economic uncertainty hampers demand for consumer products," said Ed Colligan, Palm's president and CEO.

Cost-Cutting Measures

Colligan went on to say, "In order to ensure Palm's long-term success during these uncertain times, we're taking several steps to significantly reduce our cost structure. These measures will help us navigate this difficult period while launching our next-generation products as planned."

The company is reducing its U.S. work force, consolidating its European operations, and shifting responsibility for Asia Pacific sales, marketing, and administrative support to its U.S. offices. It expects that these and other cost-savings measures will reduce operating expenses by approximately $20 million a quarter.

Struggling to Reinvent Its Products

Like many companies, Palm is being buffeted by the current economic crisis, but it's in an especially tough spot, as it is in the middle of a significant change. It's in the process of developing products based on a new Linux-based operating system to replace the aging Palm OS, and no one is sure how this is going to turn out.

The company's consumer flagship model, the Palm Centro, has been a solid performer, but it came out more than a year ago. It won't be replaced until the company can release devices based on its new OS, which is scheduled to happen by the middle of next year.

As a result, Palm is depending on its Windows Mobile-based Treo models, which are running into delays.

Related Articles:

• Elevation Partners ''Very Pleased'' with Palm's Progress
• Palm Laying Off Employees, Focusing on Fewer Projects