Friday, March 24, 2006

Palm's Profits Jump As Treo Sales Double

Yesterday, Palm announced its Q3 earnings, reporting profits "jumped sixfold" and sales climbed 36 percent to $388.5 million. "Treo shipments doubled from a year ago to 564,000." The Consumer Electronics Stock Blog has a full transcript of the earnings call. Not only the scripted parts from the execs, but the Q&As with the financial analysts, which makes for a nice read.

In, Rob Enderle at the Enderle Group said, "The market looks very strong for them. RIM has given them that opportunity."

Over at CIO, Todd Kort at Gartner said, "The downside is that 80 percent of their sales are in the U.S., which is actually kind of dangerous. The U.S. buys 40 percent of all PCs in the world, but only 5 or 6 percent of all smart phones,."

Kort thought "Palm could see its total market share slip. Worldwide growth in sales of smart phones is slated to increase from 46 million last year to 96 million this year, while Palm grows only from 1.95 million to about 3 million. That would reduce Palm’s market share from 4 percent or 5 percent to 3 percent."

However, the Treo's "average selling price (ASP) of $511 per smart phone, compared to just $197 per handheld," helped power "Treo sales to represent a record 74 percent of Palm’s revenue for last quarter."

Kort added, "Clearly their future is with smart phones, and as that mix moves toward the higher ASP, it will give them better gross margins and improve their financial picture."

MarketWatch takes a look at Palm's past, present and future. Albert Lin at American Technology Research said, "Palm took Apple's Newton idea and perfected it. Aside from the elegance of the great technology for handwriting recognition, the Palm OS was absolutely state of the art in the way it made technology simple and reliable."

Regarding the company's IPO during the boom and its subsequent troubles, Lin said, "Palm hired an incompetent CEO, Carl Yankowski, who cared more for his own ego than any of his customers." This opened the door for other players such as Research in Motion. Lin added, Palm allowed RIM to "steal a market that should have been Palm's."

Which leaves us with the market today. Palm is in a better position given the most recent quarter's results and the market for enterprise mobile space is starting to heat up. Will Palm have the goods to succeed?