Is Palm, maker of the beloved Pilot on its deathbed?
If you are one of the millions that once could not live without your “second brain” a.k.a the Palm Pilot®, the memories of such days may well be reduced to just that, only memories.
With an inability to stave of defections to the now ubiquitous BlackBerry® manufactured by Canadian company RIMM, or the now ubiquitous replacement to that corporate staple, known as the iPhone®, Palm now finds itself in desperate times.
It is always a sad day to see an everyday icon go by the way side. But such is tech and its gadgets. Its fans are ever demanding more. More design, more function, more features and more price reductions. Technology companies have tried to play this game of catch up and stay ahead at the cost of their own corporate vision, and profitability.
With the advent of the game-changing iPhone, Apple has reinvented the way smart electronics are expected to operate. More importantly, they have created the new standard for the customer experience. How ironic, that a company that once was also the headline king capturing death nell countdowns of its near demise, has reinvented not only itself, but entire media industries it dominates. Apple is now a top 5 company with a $200 billion market cap.
Palm, now with a huge inventory oversupply, a sales forecast cut in half and a roaring cash fire make Palm’s chances for survival slim.
Palm reported mixed fiscal third quarter results and troubling projections for the current quarter ending in May. Looking ahead, the company says sales will fall below $150-million (U.S.) in the quarter, which is more than 50% below the analyst target of $305 -million.
Analysts didn’t waste much time weighing in. Canaccord Adams cut Palm’s price target to $0 from $4, and Kaufman Brothers and Morgan Joseph cut Palm’s rating to sell.
Palm says it has $592-million in cash available, but executives didn’t provide a specific cash burn forecast for the current quarter or provide an answer to how many quarters it can continue to operate.
Morgan Stanley analyst Ehud Gelblum estimates Palm’s fiscal fourth quarter cash burn will be about $148-million. If true, that will consume 25% of Palm’s cash, leaving the company with $444-million left to live on.
Assuming the quarterly cash burn moderates to a mere $100-million a quarter, Palm has about a year’s worth of cash left.
Palm CEO Jon Rubenstein, a former Apple VP, has been leading Palm with apparently with only one goal: beat his former employer at their own game. Unfortunately, the goal of a CEO is lead a company into profitability. Not to satisfy personal grudge matches.
Palm was embroiled with Apple recently in a technology fight in which, rather than invent their own iTunes®, Palm decided to manipulate the USB hardware identification routines to allow the Palm Pre to pretend to be an iPhone. This allowed The Palm Pre to acquire the same iTunes synchronization ease -of-use that the iPhone has. Apple would release a new update to iTunes that would beak this Palm “hack”. The two companies went back and forth with updates to their respective products to leapfrog the other. Eventually Palm was criticized by the international standards organization because of the improper use of the USB standards, and Palm relented.
Palm’s customers were the real losers unfortunately, because Palm should have created their own solution from the beginning.
Palm may have realized all too late that sometimes the best thing to do, is what you do best. Not what your competitor does best.
