Palm waiting for Pre to end revenue slump

Palm's run of rough quarters did not end in February, as the company announces it recorded nearly half the revenue Wall Street was expecting it to garner.

Tom Krazit Former Staff writer, CNET News
Tom Krazit writes about the ever-expanding world of Google, as the most prominent company on the Internet defends its search juggernaut while expanding into nearly anything it thinks possible. He has previously written about Apple, the traditional PC industry, and chip companies. E-mail Tom.
Tom Krazit
2 min read
Palm can't wait for the Pre to hopefully end a streak of rough financial quarters. CNET

Palm may have wowed the public with the demonstration of the Pre, but unfortunately for the company, no one can buy it yet.

The company announced Tuesday that its third fiscal quarter will be dismal, as had been expected. But it will be even worse than Wall Street had thought: Palm expects to record between $85 million and $90 million in revenue for the quarter that ended last week. Analysts had been expecting Palm would take in $157 million during the quarter.

It's a simple story for Palm: although it debuted to rave reviews, the Pre isn't ready, and sales of its older products have fallen off a cliff. While the company tried to cover the gap with the Treo Pro, sales haven't been brisk given the economic climate and tepid carrier support.

The Pre is expected to arrive on Sprint's network in the second calendar quarter, but probably won't arrive early enough in that quarter to make a difference. As part of Tuesday's announcement, Palm said it plans to account for sales of the Pre using the same method Apple is using for the iPhone, that is, recording the revenue associated with each sale over a 24-month period, rather than all up front. This allows the companies to deliver software updates for free while satisfying an obscure accounting rule.

Before then, however, Palm also has to account for the $100 million cash injection that it received from Elevation Partners in December. The company burned pretty much all that money--between $95 million and $100 million--during the quarter, according to its press release, prompting it to consider tapping other sources of capital.