Palm is now predicting revenues from its relaunched smartphone business will fall far short of earlier projections, and hopes. Instead of a fiscal year total of $1.6 billion-$1.8 billion, revenues will be "well below" that forecast. Some are already predicting this is the beginning of the end for the device maker.
In a statement today, the company said carrier orders were cutting or deferring orders for Palm webOS-based smartphones, such as the Pre Plus and Pixi Plus, in the face of "slower than expected consumer adoption" of the new products. Revenues will be lower for the current third quarter and for the entire fiscal year, the company said. The original Palm Pre, the first using Palm's well-regarded, innovative webOS, went on sale last June.
The stock plunged in response, losing $1.39, or more than 17%, to $6.70. It had already taken a hit earlier in the week, in response to critical evaluations from stock analysts. Vivek Arya, analyst with Bank of America/Merrill Lynch, changed his stock rating from "buy" to "underperform", and cut his price target for the company's stock from $20 to $10. The stock had reached a high of $17.39 last September. At end of day this past Monday, the stock price was $9.12; by end of day Wednesday, it had dropped still further to $8.07 on heavy trading.
In the company's statement, Jon Rubinstein, Palm's chairman and CEO is quoted as saying "Our carrier partners remain committed, and we are working closely with them to increase awareness and drive sales of our differentiated Palm products."
But in his analysis, Arya wrote that the "window of opportunity may be closing" in the face of continued, growing success for Google's Android, Research in Motion, the Apple iPhone, and even Microsoft's retooled Windows Phone 7. Palm has only $130 million in net cash to meet extensive, increasing operating expenses, such as new advertising program for the webOS product line. "Palm's options may be limited in our view," he wrote.
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