Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Palm in an "i" of a Storm

Palm (Nasdaq: PALM  ) can't seem to catch a break.

Reporting first-quarter results last night after the bell, the one-time smartphone pioneer said that non-GAAP net income fell 57% to $0.09 a share, a penny ahead of Wall Street's forecast. Revenue, meanwhile, inched upward by around 1%, to $360.8 million.

Pretty bad, eh? Sure, but what seems to have irked investors, who sold off the stock by 4% in early trading today, are Palm's projections. The company says that second-quarter adjusted earnings will range between $0.06 and $0.08, and that revenue will come in between $370 million and $380 million. Wall Street was expecting much more, and it plugged its nose upon getting a whiff of the news, as if lower Manhattan's sewers had overflowed.

Frankly, I'd be more upset over the cash flow situation. Palm's free cash flow fell from $13.8 million a year ago to $11.5 million in the latest quarter, making its "beat" on the bottom line seem to be pyrrhic, at best.

A look at the gross margin confirms the sacrifice. Gross margin slid to 36.3% from 36.9% last year and 38.2% in the fourth quarter.

Rebates and discounts are partly to blame. Witness the new Centro smartphone -- think of it as "Treo Lite" -- which will sharply undercut similar offerings from rivals. Here's how Chief Financial Officer Andrew Brown explained it during yesterday's conference call:

We've decided to be, quite frankly, more aggressive on pricing, as you can see. The Centro is coming out of the chute at $99 and part of that is us trying to drive our position in the marketplace. We think that's the right thing to do right now for the company.


Price cuts are only the "right thing to do" when there's no other competitive weapon in sight. It's the blunt instrument that, too often, blunts returns. By resorting to it, management is admitting that it's having trouble competing with Apple (Nasdaq: AAPL  ) , Nokia (NYSE: NOK  ) , and Research In Motion (Nasdaq: RIMM  ) .

Keep Palm out of your hands, Fool.

Get your clicks with related Foolishness:

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 537836, ~/Articles/ArticleHandler.aspx, 10/22/2016 1:54:52 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

6/30/2010 4:00 PM
PALM.DL2 $5.69 Down +0.00 +0.00%
Palm CAPS Rating: *
AAPL $116.60 Down -0.46 -0.39%
Apple CAPS Rating: ****
BBRY $7.37 Down -0.11 -1.47%
BlackBerry CAPS Rating: *
NOK $4.92 Down -0.08 -1.60%
Nokia CAPS Rating: **