Today, as we await next week's Q1 2008 earnings from Palm (NASDAQ:PALM), we learn that Palm's once-upon-a-time corporate parent, 3Com (NASDAQ:COMS), is getting taken private over on the far side of the globe. I suspect students of the PDA specialist's history can find some deeper meaning in this, but I just see a curious confluence of coincidences. Let's get to digging into Palm's profits preview.

What analysts say:

  • Buy, sell, or waffle? Twenty-one analysts still cover Palm; four rate it a buy, while 11 more suggest holding. Five have abandoned all hope and say you should sell.
  • Revenue. On average, they're looking for about 1% sales growth to $360.3 million.
  • Earnings. Profits are predicted to plunge 62% to $0.08 per share.

What management says:
Management gave us a preview of what to expect just last month. Specifically, revenue of between $359 million to $361 million, earnings per share of $0.08 or $0.09 pro forma, and somewhere between breakeven and a loss of a penny a share, GAAP. We're told to expect that gross margin will be 35%-37%. But here's the funny thing -- as much as investors hate this stock (it gets a single, lonely star on Motley Fool CAPS) -- that's a better gross margin than Motorola (NYSE:MOT), Nokia (NYSE:NOK), Hewlett-Packard (NYSE:HPQ), or even Apple (NASDAQ:AAPL). Among its close competitors, only Research In Motion (NASDAQ:RIMM) grosses higher.

What management does:
So remind me why it is that investors hate Palm? Ah, yes. I remember now. Because it totally fumbles that gross margin advantage farther down the income statement, and ultimately pulls down the lowest operating margin of the bunch.

Margins

2/06

5/06

8/06

11/06

2/07

5/07

Gross

31.3%

33%

33.7%

35%

35.8%

36.9%

Operating

6.8%

8.2%

7.7%

6.9%

5.8%

4.7%

Net

21.6%

21.3%

21%

5.6%

4.4%

3.6%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Dang! Once again, our most recent update on the company's progress -- as compiled by Motley Fool Stock Advisor co-advisor David Gardner and his merry band of stock pickers -- came out too recently for me to be able to reveal the contents just yet. To get our very latest thoughts on the company, updated just weeks before the earnings news, you'll have to sign up for a trial to the service. (But don't worry. It is free, after all.)

For those for whom "free" is too pricey, however, here's what David and the gang had to say about Palm back in early September:

Palm is simply not hitting on all cylinders these days... We are ambivalent about the move to discontinue the Foleo, as it reflects both a narrowing of focus (a plus) and a failure to properly predict consumer needs (a big minus). Either way, we are looking for significant improvement from the company before we even consider it for new money. Analyst Tim Beyers is one Fool that is respectfully asking for CEO Ed Colligan to exit the building.