A Sweaty Palm Might Let the Pre Slip

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I don't envy Palm (Nasdaq: PALM  ) CEO Ed Colligan these days. This is the age of the Apple (Nasdaq: AAPL  ) iPhone meeting Google (Nasdaq: GOOG  ) Androids, while Research In Motion (Nasdaq: RIMM  ) keeps making its BlackBerrys ever slicker and consumer-friendly. 

Oh, and there's this global economy crunch going on, too. Selling Treos and Centros into that brutal environment can't be easy, or fun. The same goes for owning Palm stock.

So I'm hardly surprised to see that Palm kept its third-quarter report to a bare minimum last night. The company lost $98 million, or $0.89 per share, on sales of $90.6 million. Those are grim figures, punctuated by 42% lower unit smartphone sales year over year. Palm burned through $92.1 million of cash to fuel its operations, and it's down to $219.4 million in cash equivalents.

Palm is already tapping into alternative cash sources to fund its day-to-day business. This quarter included a $103.6 million net take from additional stock sales, which represents roughly 11% of Palm's total market cap today. That cash injection came partially from remarketing shares purchased by Elevation Partners, the private equity firm that already was Palm's largest shareholder.

At this rate, I imagine that Elevation -- where mercurial U2 singer-activist-humanitarian Bono is part of the team -- would run out of patience with the cash burn before too long. We still don't have a release date for the much-hyped Palm Pre -- Mr. Colligan is only talking about a nebulous intention to "deliver this product into the hands of consumers within the next 15 weeks." Neither Palm nor service partner Sprint (NYSE: S  ) can afford to drag it out much longer.

Will the Pre restore Palm to health, as in the glory days of Palm Pilot PDAs and the early days of the Treo? Maybe. But that Hail Mary of a product launch may be too little, too late. Palm is playing a risky game here. Think it's going to pan out? Let us know in the comments box below. It's fun, free, and takes mere seconds to do.

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Fool contributor Anders Bylund is a Google shareholder, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.

Read/Post Comments (8) | Recommend This Article (7)

Comments from our Foolish Readers

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  • Report this Comment On March 20, 2009, at 3:34 PM, MurphyMacdotCom wrote:

    Obstacles: Tons of consumers have invested in iTunes, the Pre won't work with it. Developers have committed to Apple's App Store. Business users are still hooked on Blackberry. Other iPhone killers have been hyped, none of them have delivered.

    Apple has a head start on so many fronts: App Store, third party accessories, Apple TV integration, iTunes, movie rentals...

    How much is left for the Pre?

  • Report this Comment On March 20, 2009, at 3:37 PM, BigPreFan wrote:

    The Pre is the phone. You couldn't give me an Iphone.

  • Report this Comment On March 20, 2009, at 4:00 PM, marv08 wrote:

    Even if everything works out fine for them, being limited to Sprint will not bring back any "glory days" in the short term. While investor McNamee is going completely nuts with lunatic statements, Palm's own staff admits that the device still needs "some polish" and have changed their tune quite a bit since January (they are now praising the future of Web OS more than the actual device). The iPhone OS was polished some 6 months before the device launched and Palm wants to polish, test, manufacture and ship in less than 15 weeks? Add to that Palm's poor track record of product launches, the economy, the cell provider, the incompatibility with existing Palm OS applications and no new ones in sight, the lack of accessories and an ecosystem, no support for the market leading media store, no real SDK, no native applications or higher end games, no syncing with any computer, no enterprise support, no date and no price... I do not see them making a major dent. You really have to hate Apple or RIMM to go for the Pre-mature at this point. By the time the device hits the market, RIMM will have the major quirks of the Storm sorted out, and Apple's next iPhone will be announced in late May or early June and close the case.

  • Report this Comment On March 20, 2009, at 5:06 PM, Aryabod wrote:

    marv08, where have you been, according to most tech and IT experts the Pre works phenomenally. The issues pending are to make the phone perfect and perfection is impossible. What I saw demonstrated at the Consumer Electronic Show in Vegas was not a mirage and you would have to be delusional to think that the Pre is nothing other than a hoax. Apple will have a lot of catching up to do, which is possible, if it wants to regain its crown once the Pre is launced, but don't fool yourselves this is a real device, not a concept. The issues at Palm are logistics, however it is not one that money can't resolve. RIMM & Apple combined are no match for Palm's new entrant. You will be a believer when you see what this Pre can do. I am already salivating over it and to be honest with you I am getting impatient. I hate my HTC windows based device and were it not for the Pre I would have already surrendered to buying the iPhone.

  • Report this Comment On March 20, 2009, at 5:40 PM, marv08 wrote:

    Aryabod, if you like it, that is of course fine. I have been to CES and what I have seen is that only a few functions have been previewed at all, and that visitors to the booth were not allowed to hold the device. This speaks louder than words. For me everything I cannot buy is a concept, I could not buy a Pre now, even if I wanted one. I did not call it a hoax though – it certainly is not. I doubt that it is really ready though. If they cannot make any concrete statements about the devices speed 15 weeks before market launch (and they admitted that after McNamees kamikaze stunt), then it is not ready.

    Your assumption that Apple has catching up to do is odd. They have the media content, integration into almost every decent car and quite a few aircraft, they have over 50,000 active developers developing for more than 30 million iPhone and Touch users, they have most enterprise features (Exchange, VPN, certificates), a rock solid tried and tested OS and availability in some 80 countries. Palm has nothing, just a brand new (untested) device that can run a few Web widgets that will likely be more expensive than the iPhone despite of less features, less storage, no syncing whatsoever and no applications. It is Palm that has catching up to do – if they even want that. Maybe they just want to "elevate" the stock up far enough to give the investors a decent cut in an acquisition.

  • Report this Comment On March 22, 2009, at 2:29 AM, quixel wrote:

    Marv812 is shortsighted and short in memory too.Does he not rememebr that when Iphonecame out they also hadnone of whathe describes Palmis missing?Ohyes I forgetApple is the HolyGrailand how dare anyone question it,lol kinda sounds likethe Obama fanbois,Do not question or ELSE we will destroy you!!! You sound a little(majorly) bigoted IMO. The Pre looks incredible and I am sure they will have a great marketplace up and ready in no time just as Apple did AFTER the device was out. Marv wants double standards and double standards suck like marvs.

  • Report this Comment On March 22, 2009, at 8:20 PM, lamontsf wrote:

    I have owned 4 different treos going back to the Treo 300 flip phone. Nearly every launch of theirs was a little rocky, with crashing issues and some near-emergency firmware update from sprint.

    That said, I'm going to buy the pre. I like sprint as a network and palm has a very good track record of supporting developers. I'm prepared to give them the benefit of the doubt on this one.

    I'm sure the launch will be a little rough, but I'm confident that this will be a great product and an interesting new OS.

  • Report this Comment On March 24, 2009, at 11:16 AM, glamajamma wrote:

    I am so glad I don't turn to Motley fool for stock advice. My stock in palm is up 40% from when I purchased it two weeks ago.

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