By Dan Gallagher
Shares of Palm Inc. (PALM) rallied out of the box Friday,
quickly rising 10% as investors reacted favorably to the handset
maker's fourth-quarter financial results.
Late Thursday, the company reported its quarterly losses widened
on a sharp drop in sales. Palm's fiscal fourth quarter ended May
29, a week or so before the company's popular Pre smart phone went
on sale.
Shares were last up 9.5% at $15.35.
The company didn't issue a forecast for the current period, but
said it expects to be cash-flow positive by the end of the calendar
year.
"We think the Pre is by far the best product we have ever
shipped, and I am very happy with how we're managing the launch,"
Palm CEO Jon Rubinstein said on a conference call. "We're
successfully ramping supply to meet demand that is strong and
growing."
Palm launched the Pre on June 6 and is betting heavily on the
new device - as well as its new webOS operating system - to revive
its struggling smartphone business, which has suffered loss of
market share to rivals such as the iPhone and BlackBerry.
Rubinstein noted that the company faces "vigorous competition"
in the smartphone space now dominated by the BlackBerry from
Research In Motion (RIMM) and the iPhone from Apple Inc (AAPL).
Yet Rubenstein also argued that there is room for Palm, an early
pioneer in the market that has since lost much of its share to the
competition.
"Such significant growth means there is room for three to five
players to win in this space," he said. "We don't have to beat each
other to prosper."
'Sufficient Capital'
For the fourth quarter, the wireless device maker reported a
loss of $91.5 million, or 78 cents a share, compared to a loss of
$43.4 million, or 40 cents a share, for the same period the
previous year.
Excluding stock-option charges and expenses related to
restructuring, Palm said net losses would have totaled $53.4
million, or 40 cents a share, for the recent period. Analysts were
expecting a loss of 62 cents a share for the quarter, according to
consensus forecasts from Thomson Reuters.
Revenue fell 71% to $86.8 million. Analysts were expecting
revenue of $80.6 million.
Smartphone shipments totaled 351,000 units and smartphone
sell-through was 460,000 units. The company said shipments included
the Pre as well as the Treo Pro, though sales of its maturing
Centro line are slowing.
Palm said it had $255.1 million in cash and equivalents by the
end of the period. CFO Doug Jeffries said the company has
"sufficient capital to support our current operating plan and to
make the necessary investments in marketing product development and
operations to drive long-term success."
Palm kept to its habit of not giving a forecast for the current
period. Jeffries said the company expects to turn cash-flow
positive by the second half of the company's 2010 fiscal year,
meaning the end of November.
Growing The Developer Base
Like the iPhone, the Palm Pre includes an online app store.
Rubinstein said more than one million apps have been downloaded
since the launch of the Pre, but the store still lags by far the
popular App Store at Apple.
Palm is still working to get development kits, or SDKs, out to
the community of developers who want write applications for webOS.
He said the company has "hundreds" of developers working on
applications now, and plans to have "thousands" when the final kits
ship by the end of the summer.
"We have a lot of people in the queue, and so I don't think we
have had a real issue as of yet with interest out there," he
said.
-Dan Gallagher; 415-439-6400; AskNewswires@dowjones.com