Business | Technology
Palm shares fall amid plummeting sales
Shares in Palm fell by 36 per cent in early trading Thursday after the US-based maker of PDAs and the Treo smartphone said that its sales in the latest quarter had almost halved.
- By Paul Taylor, Financial Times
- Published: 23:46 December 5, 2008
Shares in Palm fell by 36 per cent in early trading Thursday after the US-based maker of PDAs and the Treo smartphone said that its sales in the latest quarter had almost halved.
The stock, which has fallen by 70 per cent this year, dropped to $1.22 (Dh4.4) by 66 cents on the Nasdaq in early trading in New York after the company fell far short of analyst expectations.
Second quarter revenues to November 28 dropped 45 per cent to $190 million, down from $349.6 million in same period last year.
Most analysts had been expecting revenues of around $332 million.
Demand muted
The company blamed reduced consumer spending for the drop in revenue.
It said it was planning to cut costs by 20 per cent by trimming its workforce and streamlining its European operations.
"We are seeing unprecedented dynamics in the global markets as economic uncertainty hampers demand for consumer products," said Ed Colligan, Palm's chief executive.
Analysts suggested that Palm was suffering from feeling the impact not just of the slowdown in consumer spending, but also of its lacklustre product portfolio at a time when the company faced growing competition from rival smartphone makers including Apple, Research in Motion and Nokia.
Palm has been struggling to update an ageing product line while developing a next-generation operating system and a new device due to be launched in the first half next year.
Centro product
The basic design of its Treo family of smartphones is now seven-years old.
And while its $99 Centro handset has proved a big hit with consumers -Palm sold 2 million Centro handsets in less than a year - the margins are not as high as achieved on the Treo range.
"Palm's Centro product, now over one year old, experienced very anaemic sell-through," Vivek Arya, a New York-based analyst at Merrill Lynch, wrote in a note Thursday.
He cut his rating on the shares to "neutral" from "buy".
Other analysts suggested that Palm could face a liquidity squeeze and speculated that the continued depressed stock price could force Elevation Partners, the private equity firm which acquired an equity stake in Palm last year, to unload its stock.
Elevation has said previously that it is "very pleased" with the progress the company is making.
Elevation made its investment last year in the form of convertible preferred stock, with a conversion price of $8.50 a share.
Roger McNamee, the firm's co-founder, said last week that the company had no plans to sell the 325,000 Series B Palm shares.
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