For of all sad words of tongue or pen,
The saddest are these: "It might have been!"
-- John Greenleaf Whittier
I wonder if an exec at Palm
The Pre, as you might recall, was meant to restore Palm's status as a big player in the smartphone wars -- a status that had fallen apart as the company's Treo line of Palm OS and Windows Mobile smartphones was battered by competition from Apple
But after Palm's latest earnings report, you have to wonder if Palm and webOS are doomed to remain in also-ran status. Adjusted earnings came in at a loss of $0.37 per share ($0.05 worse than expected), and while revenues and unit shipments came ahead of estimates, that was only because of a massive inventory buildup of Palm phones by carriers. Palm's sell-through (i.e., the number of phones actually purchased by consumers) was a mere 573,000 units -- a full 210,000 below its unit shipments. And as a BMO Capital Markets analyst noted, with 20% of sell-through involved non-webOS products, the inventory build for the Pre and Pixi is likely even worse than that gap.
I think some of the weaker-than-expected demand can be chalked off to Palm's exclusive distribution agreement with Sprint, a carrier that's been bleeding market share for quite some time and has a weak competitive position in the corporate world. But the bigger issue, without a doubt, is the stranglehold that competing smartphone platforms have on the attention spans and wallets of consumers.
The iPhone's extraordinary success needs no explanation, nor does the cult-like following that BlackBerrys have among email and messaging addicts. And the ecosystems that Apple and RIM have built around their platforms -- in the iPhone's case, the App Store, and in the BlackBerry's case, its corporate IT support -- make it even harder for an outsider with limited resources to break in.
Now, Palm also has to deal with a major push from Google
In the aftermath of Palm's earnings dud, estimates took a huge nosedive. The company's now expected to lose $0.75 per share in its May 2010 fiscal year, and post a profit of just $0.02 per share in the following year, as soaring sales and marketing expenses help offset revenue growth. Now more than ever, a marriage between Palm and Nokia
Nokia, unlike Palm, does have the resources and brand power to reverse its smartphone fortunes. But as Palm's struggles show, this is a market where time is of the essence.
Eric Jhonsa has no position in any of the companies mentioned. Google is a Motley Fool Rule Breakers selection. Apple is a Motley Fool Stock Advisor pick. Nokia and Sprint Nextel are Motley Fool Inside Value selections. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.
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