12-19-2002, 03:00 PM
|
|
Contributing Editor Emeritus
Join Date: Aug 2006
Posts: 8,228
|
|
Palm Turns Profit In 2nd Quarter on Declining Sales and Volumes
Palm's 2nd quarter ended November 29, 2002 and they trounced earnings estimates. Analysts were expecting them to lose 15 cents a share, or roughly $4.3M. They instead made 12 cents a share, or $3.5M. Net sales dropped 9% from the same quarter last year from $291M to $265M. This quarter they sold 1.4M devices compared to 1.51M units last year. It is obvious they have cut a ton of fat and/or unnecessary costs as Palm positions itself to sell in the mid $200M range instead of the $522M range at its peak from November 2000.
Interesting items in the numbers:
� Gross margin percentages went from 35.7% in Q2 2002 (last year) vs 32.8% in Q2 2003, however last year had an inventory adjustment of <$43M> that artificially increased gross margins. Take that out and they did 20.1% last year, so increasing it to 33% this year is a marked improvement.
� Sales and marketing expenses dropped from $61M to $45M.
� Research and Development dropped from $37M to $27M.
� Operating income was $389,000 this year. They got to $3.5M of income with the interest their cash account.
� Cash flows from operations was <$10M>, much of that due to a $70M increase in Accounts Receivable, partially offset by an increase in Accounts Payable of $43M. Trust me, this isn't a bad thing having this decrease. If you want more details, ask in the thread and I'll go into the gore of a Cash Flows Statement. They sold $20M in preferred stock though which made their cash position grow $10M from the last quarter. Get it while you can. At some point they will have to make money on their own.
� Their PalmSource division is sort of sliding sideways, even with the OS5 launch. Revenues were $15.1M in Q2 2002 and are $14.8M in Q2 2003. They lost $8.7M last year and $7.6M this year - a decent improvement on virtually flat sales.
We probably won't see any good market share numbers until January. Analysts pay more attention to calendar quarters, not fiscal quarters a company uses. Will Palm gain share this quarter? Their sales and volumes are off from last year. The question is, will the overall handheld market show a decline and will Palm decline faster or slower than the overall market?
|
| |
|
|
|
12-19-2002, 03:23 PM
|
|
Pontificator
Join Date: Aug 2006
Posts: 1,177
|
|
Re: Palm Turns Profit In 2nd Quarter on Declining Sales and Volumes
Quote:
|
Originally Posted by Ed Hansberry
� Research and Development dropped from $37M to $27M.
|
$27M in R&D is virtually nothing. Two comments on that:
1. It's impressive that they still can be a player with that budget
2. Too bad, really, that they can't spend more. This market needs a lot more R&D from everyone involved, not less!
|
| |
|
|
|
12-19-2002, 05:05 PM
|
|
Pontificator
Join Date: Jul 2003
Posts: 1,466
|
|
They aren't looking too bad. I agree, they need to pour more money into R&D. But otherwise, I have positive feelings that Palm will persevere. The bigger question is how, or even if, Palm will compete with Dell in high-end pricing. Tungsten is terribly over-priced. I see online vendors are already offering $50 rebates. Try slashing that price down to $399, then we'll talk.
|
| |
|
|
|
12-19-2002, 05:47 PM
|
|
Thinker
Join Date: Jun 2002
Posts: 390
|
|
The need more ARM models and start retiring the dragonball for the sub$99 market. The Tungsten price will kill the OS5.0 acceptance.
|
| |
|
|
|
12-19-2002, 05:51 PM
|
|
Mystic
Join Date: Jul 2003
Posts: 1,768
|
|
$10m
Spending $10million less on R&D means that much less innovation. This is an illustration in management's lack of foresight and an indication they are forfeiting the future for short term margin. Microsoft has always done it right with smart investments in development as first financial priority in expenditures.
__________________
Jonathan (JonnoB)
"All that is necessary for the triumph of evil is that good men do nothing." -Edmund Burke
|
| |
|
|
|
12-19-2002, 05:53 PM
|
|
Pontificator
Join Date: Jul 2003
Posts: 1,466
|
|
Quote:
|
Originally Posted by mookie123
The need more ARM models and start retiring the dragonball for the sub$99 market.
|
Agreed. And monochrome is no longer justifiable over $99. Palm and Sony had better retire those $199 grayscale models and replace them with color offerings right away.
Quote:
|
The Tungsten price will kill the OS5.0 acceptance.
|
Not kill its acceptance, but it will certainly slow adoption.
|
| |
|
|
|
12-19-2002, 05:56 PM
|
|
Pontificator
Join Date: Jul 2003
Posts: 1,466
|
|
Re: $10m
Quote:
|
Originally Posted by JonnoB
This is an illustration in management's lack of foresight...
|
Not really. I think it has more to do with the fact that Palm has to live on a tight budget. I'm sure management would much rather poor MORE money into R&D than LESS.
|
| |
|
|
|
12-19-2002, 06:11 PM
|
|
Contributing Editor Emeritus
Join Date: Aug 2006
Posts: 8,228
|
|
Quote:
|
Originally Posted by mookie123
The need more ARM models and start retiring the dragonball for the sub$99 market. The Tungsten price will kill the OS5.0 acceptance.
|
Their new Tungsten W model is a OS4.x based device. I think OS4 will be around for another year or so at least, especially for the cheap devices.
|
| |
|
|
|
12-19-2002, 06:15 PM
|
|
Mystic
Join Date: Jul 2003
Posts: 1,768
|
|
Re: $10m
Quote:
|
Originally Posted by Foo Fighter
Quote:
|
Originally Posted by JonnoB
This is an illustration in management's lack of foresight...
|
Not really. I think it has more to do with the fact that Palm has to live on a tight budget. I'm sure management would much rather poor MORE money into R&D than LESS. |
I am not so sure about that... I think they would rather spend marketing money giving away Creative mp3 players to say that they can play mp3 files 
__________________
Jonathan (JonnoB)
"All that is necessary for the triumph of evil is that good men do nothing." -Edmund Burke
|
| |
|
|
|
12-19-2002, 06:30 PM
|
|
Magi
Join Date: Feb 2002
Posts: 2,386
|
|
They already have their major innovations with Palm OS 5.0 and the Tungsten, right? By the law of averages, wouldn't that mean they could go another 3-5 years w/o significant R&D?
|
| |
|
|
|
|
|
Linear Mode
