Palm Smartphone Revenue Down 72% In Q3-08

Palm have announced their Q3 2009 financial results, and as expected the pre-Pre figures are pretty grim.  Smartphone sales for the quarter were down 42-percent to 482,000 units, while smartphone revenue was down a huge 72-percent compared to Q3 2008, at $77.5m.   Total revenue was $90.6m, and the company is left with $219.4m in cash, cash equivalents and short-term investments.

For shareholders it means disappointment, with a net loss of $0.86 per diluted share.  That's considerably higher than the $0.16 net loss the year previous for the same period.  Palm spent $92.1m through Q3 2009 in operations.

The company recently raised $103.6m after a stock sale, which should hopefully tide them over until the launch of the Palm Pre.  The upcoming handset really will be the make-or-break device for Palm.

Press Release:

Palm Reports Q3 FY09 Results

SUNNYVALE, Calif. –(Business Wire)– Mar 19, 2009 Palm, Inc. (NASDAQ:PALM) today reported that total revenue in the third quarter of fiscal year 2009, ended Feb. 27, 2009, was $90.6 million. Smartphone sell-through for the quarter was 482,000 units, down 42 percent year over year. Smartphone revenue was $77.5 million, down 72 percent from the year-ago period.

"We're proceeding through a challenging transitional period, however our current results shouldn't overshadow the tremendous progress we've made against our strategic goals. We're poised to usher in a new era at Palm," said Ed Colligan, Palm president and chief executive officer.

Net loss applicable to common shareholders for the third quarter of fiscal year 2009 was $(98.0) million, or $(0.89) per diluted common share. Net loss applicable to common shareholders included stock-based compensation of $5.3 million, amortization of intangible assets of $0.9 million, restructuring charges of $5.7 million, a casualty loss of $5.0 million, an impairment of non-current auction rate securities of $4.0 million, a gain on a series C derivative of $20.6 million and accretion of series B and series C preferred stocks of $3.0 million. This compares to a net loss applicable to common shareholders for the third quarter of fiscal year 2008 of $(57.0) million or $(0.53) per diluted common share, which included stock-based compensation of $6.2 million, amortization of intangible assets of $1.0 million, restructuring charges of $12.3 million, an impairment of non-current auction rate securities of $25.5 million and accretion of series B preferred stock of $2.4 million.

Net loss for the third quarter of fiscal year 2009, measured on a non-GAAP(1) basis, totaled $(94.7) million, or $(0.86) per diluted share, excluding stock-based compensation, amortization of intangible assets, restructuring charges, a casualty loss, an impairment of non-current auction rate securities, a gain on a series C derivative and accretion of series B and series C preferred stocks. This compares to a non-GAAP net loss for the third quarter of fiscal year 2008 of $(17.0) million, or $(0.16) per diluted share, which excluded the effects of stock-based compensation, amortization of intangible assets, restructuring charges, an impairment of non-current auction rate securities, accretion of series B preferred stock and an adjustment to the related tax provision.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, for the third quarter of fiscal year 2009 totaled $(81.9) million. EBITDA, adjusted to add back stock-based compensation, net other income (expense), restructuring charges, a casualty loss, an impairment of non-current auction rate securities and a gain on a series C derivative, or Adjusted EBITDA, totaled $(78.6) million.

Cash used in operations for the third quarter of fiscal year 2009 was $(92.1) million. The company's cash, cash equivalents and short-term investments balance was $219.4 million at the end of the third quarter of fiscal year 2009.

Palm recently announced the closing of a public offering of common stock and the associated exercise of its underwriters' over-allotment option. In total, approximately 26.6 million shares were sold in the offering, including shares subject to the over-allotment option and approximately 18.5 million common shares underlying 49 percent of the units of series C preferred stock and warrants acquired by Elevation Partners in January 2009, for a public offering price of $6.00 per share. Elevation Partners, which recouped the $49 million it originally paid for its units included in the offering, used those funds to purchase approximately 8.2 million shares of Palm's common stock in the offering at the public offering price. In total, Palm received estimated net proceeds of approximately $103.6 million after deducting underwriting discounts and commissions, estimated offering expenses and the original purchase price of Elevation Partners' units.

Separately, Palm indicated that since it expects to periodically provide new software features free of charge to customers of its Palm® webOS™ products, including the recently announced Palm Pre™, it will recognize Palm webOS product revenues and related standard costs of revenues on a subscription basis based on the applicable product's estimated economic life, which is currently 24 months. The company will be recording deferred revenues and deferred costs of revenues on its balance sheet, and amortizing them into earnings on a straight-line basis over the estimated economic product life. Certain administrative and other related period costs of revenues will be expensed as incurred. This accounting policy will have no impact on cash flows and does not change how Palm accounts for Palm OS® products, like the Centro™, or its Treo™ line. A more detailed discussion of the new accounting treatment can be found on Palm's Investor Relations website at http://investor.palm.com.

INVESTOR'S NOTE

Palm will host a conference call to review the complete third-quarter fiscal year 2009 financial results beginning at 1:30 p.m. PT / 4:30 p.m. ET. The conference call will be hosted by Ed Colligan, president and chief executive officer, and Doug Jeffries, chief financial officer. Investors and other interested parties are encouraged to listen to the call by logging onto the conference call webcast prior to the start of the conference call at Palm's Investor Relations website (http://investor.palm.com). Investors wishing to listen to the conference call via telephone may dial 800.901.5247 (domestic) or 617.786.4501 (international). There is no pass code required for the live call. A telephone replay of the conference call will be available through March 30, 2009. The dial-in number for the replay will be 888.286.8010 (domestic) and 617.801.6888 (international). The pass code 15222468 is required for the replay. An archive of the audio webcast of the conference call will be posted on Palm's Investor Relations website at http://investor.palm.com.