Palm Needs Pre to Survive: Pre on Schedule

palm_prePalm has just announced quarterly announcements but the news is not so good. Revenues fell more than 70% and a net loss of US$98 million on revenues of US$90.6 million. But there is something interesting going on: shares are up and is around US$8. Why? Investors are anticipating the release of the Pre. But the Pre is still months away from being released and is expected to hit the market before June. This anticipation is keeping the company alive. Even after a terrible quarter the stock rose 4%. The stock fell to $1.14 the lowest level on December 2, 2008 after hovering around $12 to $18 for several years. The Pre is Palm’s future. “Investing in Palm has become a call option on the success of the Pre,” wrote CL King & Associates. There are about 70,000 outstanding call options with less than 50,000 put options for May. But that might be optimism put on the wrong place. Applications have become one of the most important factors determining the success of smartphones such as the Pre. The iPhone, a marvel in hardware capabilities, depend its success equally in part on the number of applications written for it. Applications for the Pre are probably being written but will take considerable effort to compete with the iPhone. The applications will be running on Palm’s new operating system underlying the Pre called WebOS.

Palm’s CEO Edward Colligan promised a roadmap of smartphones and an application ecosystem built on WebOS, similar to what Apple has done with its iPhone. The Pre will launch on Sprint’s network, where subscribers have been leaving for quite some time. “Right now we’re 100 percent focused on getting the Pre launched and the Sprint product out the door,” claimed Doug Jeffries, CFO of Palm. Palm absolutely needs a seemless execution on the Pre launch to overcome a 42% plunge in the company’s smartphone sales to just 482,000 units in its fiscal third quarter, to survive, and to succeed.

Source: Brighthand, The Mercury News, The New York Times, Reuters

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