Palm has released their financial results for Quarter 3 of 2008.
Palm, Inc. (Nasdaq:PALM) today reported that total revenue in the third quarter of fiscal year 2008, ended Feb. 29, was $312.1 million. Driven by strong demand for the Palm(R) Centro(TM), smartphone sell-through for the quarter reached a company record high, totaling 833,000 units, up 13 percent year over year. Smartphone revenue was $275.4 million.
Excepting the remarkably high sell-through rate, the numbers appear to be relatively disappointing, though it's difficult to say whether or not they matched Palm's own estimates as Palm no longer provides guidance for how they believe upcoming quarters are going to turn out. This new policy is part of Palm's "hunker-down" mode that they appear to be sticking with for the rest of the year as they continue to develop their next-generation "Nova" operating system that will replace the aging PalmOS.
Many expected these numbers given that Palm's margins on the Centro are significantly smaller than those on the higher-priced Treo line. These results are also in line with the poor numbers in their Q2FY08 results, where Palm missed estimates because of the delay of the Treo 755p. Back then, the upshot of the results were that:
Although Smartphone sell-though was up 11% year over year, that was the only bright point. Quarterly revenue was $349.6 million, significantly less than Palm had hoped to make.
Comparing last quarter's numbers to the new ones, the differences are actually relatively minor. However, one notable aspect is that Palm's trend of increasing the numbers of devices sold while simultaneously decreasing the amount of profit has not only continued but deepened. With any luck, the component costs associated with manufacturing the Centro will fall and it will become a more profitable device for the company as the year progresses.
One bright spot for Palm is that they are still enjoying the full support of Elevation Partners, who are still committed to funding Palm through this rough year in the hopes of a turnaround with the release of the new OS. New board members, notably Jon Rubenstein, have revitalized Palm's product development process -- we just hope we can see the results of this revitalization soon.
Another bright spot: Palm is converting new customers to the smartphone market, as Colligan notes, the Centro is "expanding Palm's customer base with more than 70 percent of Centro buyers trading up from traditional cell phones." Palm's next step: converting these Centro users into customers who will purchase higher-end Treos.
The full press release follows:
SUNNYVALE, Calif., Mar 20, 2008 (BUSINESS WIRE) -- Palm, Inc. (Nasdaq:PALM) today reported that total revenue in the third quarter of fiscal year 2008, ended Feb. 29, was $312.1 million. Driven by strong demand for the Palm(R) Centro(TM), smartphone sell-through for the quarter reached a company record high, totaling 833,000 units, up 13 percent year over year. Smartphone revenue was $275.4 million.
"Centro is off to the strongest start of any smartphone in Palm's history," said Ed Colligan, Palm president and chief executive officer. "Centro's fun design, great price point and amazing array of easy-to-use features is expanding Palm's customer base with more than 70 percent of Centro buyers trading up from traditional cell phones."
Net loss applicable to common shareholders for the quarter was $31.5 million, or $(0.30) per diluted share. Net loss included stock-based compensation expense of $6.2 million, amortization of intangible assets of $1.0 million, restructuring charges of $12.3 million and accretion of series B convertible preferred stock of $2.4 million. This compares to net income for the third quarter of fiscal year 2007 of $11.8 million, or $0.11 per diluted share.
Net loss applicable to common shareholders in the third fiscal quarter, measured on a non-GAAP(1) basis, totaled $17.0 million, or $(0.16) per diluted share, excluding stock-based compensation expense, amortization of intangible assets, restructuring charges and accretion of series B convertible preferred stock and adjusting the related income tax provision to 26 percent. This compares to non-GAAP net income in the third quarter of fiscal year 2007 of $16.5 million, or $0.16 per diluted share, which excluded the effects of stock-based compensation, amortization of intangible assets, an in-process research and development charge and adjusting the income tax provision to 40 percent.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, totaled negative $28.4 million. EBITDA, adjusted to add back stock-based compensation, other non-operating expense and restructuring charges, or Adjusted EBITDA, totaled negative $9.5 million.
During the second quarter of fiscal year 2008, Palm reclassified its auction rate securities, which are currently illiquid to non-current assets that are shown on its condensed consolidated balance sheet below as $74.7 million at the end of the third quarter of fiscal year 2008. Palm is in the process of completing an impairment analysis and expects to record an impairment charge that will be made available in Palm's quarterly report on Form 10-Q.
