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Palm Conference Call - What's to Come in '07?

Thu Dec 21, 2006 - 3:03 PM EST - By Dieter Bohn


As reported earlier today, Palm had their quarterly financial results conference call this past Tuesday. During the last conference call, CEO Ed Colligan let us know that a new Treo would be released "in the coming weeks." That Treo turned out to be the 680.

Unfortunately, no such luck with this conference call. On the other hand, there were some interesting details that caught my attention, both finance-related and not. Let's start with finances.


The consensus is that Palm is doing alright, but not as well as hoped because of "certification delays" on getting the Treo 750 available in the US. Mixed bag of news there - we don't have the 750 here yet and that's hurt Palm's bottom line, but it also means that the 750 should be coming soon:

Our one disappointment this past quarter was that we were unable to shift the Treo 750 into a US carrier due to delays in the certification process. This product will ship this quarter and we are confident it will be well-received by customers. Over the coming years we will continue to build a broader base of carrier relationships so that the impact of certificaiton delays can be minimized.

Palm also had record "sell through" - meaning Treos not only being sold to carriers but actually reaching consumers. This is actually rather surprising given the incredible number of competitive smartphones that have been released in the past few months: including the Motorola Q, the Blackberry Pearl, T-Mobile Dash, and the Cingular Blackjack. If Palm is able to to continue to differentiate themselves from these thin little wonders (battery life and touchscreen, anyone?), they should do alright in the future. On the other hand, after the holiday, smartphone sales tend to dip a bit, so Palm doesn't expect a ton of growth in the next quarter.

For those of you who are able to make heads or tails of corporate financial reporting, there's more information in Jennifer's write up.

Reading the Tea Leaves

Listening to the numbers, I heard a few neat things. One is that Palm expects their operating costs to rise slightly next quarter. Why? Increased costs in marketing and in R&D. Specifically, Colligan said we can probably expect a similar number of product introductions in 2007 as we saw in 2006 (though it must be said that he was much softer on this claim than he were a year ago when he virtually guaranteed 4 new Treos - a claim Palm delivered on). Even more specifically, Palm is investing heavily in software R&D.

Well now: software R&D, eh? Add that tidbit to the fact that Palm is rather happy with their recent deal to perpetually license Garnet and maybe we start to see an exciting little story develop. Add those to the fact that Colligan specifically stated that they liked the "flexibility and future control" their new terms with Access gives them and it begins to look like Palm just might have something up their sleeve.

What else does Palm have up their sleeve? Well, they're playing their cards awfully close to their chest (and who can blame them, given how competitive the market has suddenly become). I do have a favorite quote, though, which was Colligan responding to a question about whether or not Palm has plans to "leapfrog" the competition and become what they once were: far and away the undisputed king of the smartphone:

Do we we want to continue to build more differentiation and do some leapfrogging efforts. Absolutely, and we're working on those that we hope will really further separate us from the crowd. Part of that is responding to a certain extent on cost and also on form factor we're definitely doing some new and exciting designs there [...] but part of that is also on the software side where we really hope to differentiate on a number of fronts.

"Exciting designs" form-factor wise? Sounds good to me, especially given how the competition is all about thin. ...Oh, heck, here's one more statement that I enjoyed:

Our new developments are in areas where we're going to add on the high end and on to the low end of our product line. We're going to add products with more capabilities, the "Mercedes of our line." We're also going to add products with more focused functionality that we hope will appeal to crossover consumers [...] Our mix [of high-end and low-end Treos] will stay relatively consistent.

What does it all mean? Well, probably nothing I couldn't have told you before the conference call: Palm is working on innovative new Treo products, both on the high end and on the low end. The PalmOS has a future, although what exactly that future looks like is, as of yet, unclear. One thing that is crystal clear: expect the 750 in the US within the next three months (cross your fingers for sooner, they had originally wanted it out before the holidays).

P.S. If I had gotten in on the call I would have asked about Jeff Hawkins' mystery device. All this talk about software innovation (especially as relates to getting content from the Internet, by the way) makes me hope that we'll get something genuinely surprising and cool in 2007. If you haven't heard of the "mystery device" yet, be sure to click the link to read Hawkin's teaser-quote.

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