Palm Reports Poor Q3 2010 Earnings

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Palm reported its Q3 2010 earnings on Thursday and the results, as expected, are poor. The Sunnyvale, California company reported $349.9 million in  revenue for the third quarter of 2010 which ended Feb. 26, 2010. Palm reported a net loss of $22 million in Q3 2010 which is lower than the $98 million reported in the same quarter of 2009 but greater than the $13.7 million reported in Q2 2010. Palm shipped a whopping 960,000 handsets in Q3 2010 which represents a 23% increase from Q2 2010 and an almost 300% increase over Q3 2009. Despite voluminous shipments, the handset maker sold a disappointing 408,000 handsets, a paltry figure that leaves a staggering standing inventory of 552,000 unsold handsets.

Though year over year revenue continues to increase and net loss narrows, the outlook for Q4 2010 is grim. Much of the good news reported in Q3 2010 is attributed to earlier than expected handset shipments to carriers, most of which are now sitting idly in warehouses. With wireless carriers facing a backlog of handsets, Palm has slowed handset production while the current standing inventory is slowly whittled down through sales. With a dearth of shipments expected in Q4 2010, Palm projects that its revenue for the upcoming quarter will reach a disappointing $150 million and will fall far short of the $305 million originally expected by analysts.

Making a dire situation even worse, Palm faces a barrier to increasing handset sales amongst its two primary wireless carriers, Sprint and Verizon Wireless, in the US. In its earnings conference call, Palm conceded that the Verizon Wireless Pre Plus and Pixi Plus have been hurt by the popularity of the Motorola DROID and admitted that sales would have been better had it launched the two webOS handsets earlier on the nation’s largest wireless carrier. On Sprint, future sales of the now nine month old Palm Pre and the four month old Pixi  are threatened by the impending launch of the Sprint variant of the Nexus One, the rumored HTC Supersonic, and other similar high end smartphones coming down the pike. When it rains, its pours and when news of Palm’s dire financial condition hit Wall Street, Palm’s stock nosedived 14% in after hours trading and is currently hovering at $4.83 per share at the writing of this post.