Palm's Sales Drop in April

Judy Bruner, Palm's Chief Financial Officer, told investors at the J.P. Morgan H&Q Technology Conference that her company's retail sales in April were down roughly 20% from January. Sales in March were about the same as January's. Palm Inc.'s share of the handheld market in January was 60.5%. "It's been fairly weak and getting a bit weaker from February to April," said Ms. Bruner.

She also said her company wasn't ready to predict when sales would rebound. "Our visibility as to when sales will pick up is fairly limited."

However, one of the main causes for Palm's slowdown is its pre-announcement of the m500 and m505 long before they actually were available. This sucked the life out of demand for Palm's current high end models. Now that the m500 series is shipping, Palm's sales might pick back up again.

Ms. Bruner admitted that current shipments of the m505 are not enough to meet demand and high volume shipments aren't expected until the end of this month or the beginning of next.

Palm is planning to write off some of their excess inventory.

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Write off?

GregGaub @ 5/3/2001 6:52:40 PM #
I certainly hope "writing off" their excess inventory doesn't mean "destroy" it. I don't have anything to do with the industry past being an end user, but if it's anything like the agriculture industry, when they had to destroy whole crops just to keep the price high enough to survive, I won't be surprised if someone tells me Palm will be destroying thousands of units that won't otherwise be sold.
I have high-hopes, though, that they'll donate the written-off units to schools or other charities that can make use of them. As long as the units don't atually go to waste.
-Greg

RE: Write off?
I.M. Anonymous @ 5/3/2001 6:58:55 PM #
I have a prediction on when sales will increase. When you learn how to meet pre-orders and you can get your new product to market and not piss off the loyal Palm followers.

RE: Write off?
I.M. Anonymous @ 5/3/2001 7:12:20 PM #
i think in the sense, writing off is be used as an accounting term. basically they are going to reduce the value of their inventory and expense the loss. this will in have an effect on their bottom line. they are not going to destroy them.

RE: Write off?
I.M. Anonymous @ 5/3/2001 8:00:16 PM #
I believe that the focus has changed. People are more concerned about performing in their job and less focused on what tools can enhance that job. When things get tough, you go back to the basics. I have been using the Palm for years and yet am still learning how to make my job easier with this device. I think that neither I or my Palm have achieved the optimum path. One has to develop new habits. That takes time. You don't change a paradigm overnite.Your employer wants you to use new technology to become more productive, BUT does not want you to spend the time to LEARN how.

Why Palm Shipped First to Stores

Ed @ 5/3/2001 7:12:50 PM #
While I was writing this article, I came up with a guess on why Palm shipped the m505s to Office Depot before fulfilling their own Web orders. PC Data's reports are closely watched by investors and analysts as a gauge of a company's health. But PC Data only counts retail sales. Items sold from webstores are not included. I'll bet Palm is trying to make PC Data's numbers for May reflect how many m505s were actually sold. If Palm sold all their available m505s from their webstore, according to PC Data they won't have sold any at all. This would probably hurt Palm's (and Handspring's) stock price even more.

I'm not sure why PC Data only counts retail sales. Maybe they don't trust companies to honestly report sales from their own stores. But it really skews the results. Most iPaqs are bought straight from Compaq so they hardly make a blip on PC Data's charts.

---
Plenipotentiary
Palm Infocenter

RE: Why Palm Shipped First to Stores
I.M. Anonymous @ 5/4/2001 2:01:02 AM #
Actually... Retail sales make up the majority of sales of Palm handhelds and several years ago the retail channels basically said "you will get us units before you sell them or give them to online stores, or we will stop selling your products".

Not wanting to lose that (the MAJORITY) market, Palm has since shipped FIRST to retail channels and 2ND to online stores and filled their own web orders.

This isn't a recent change. This is the third (or maybe fourth) year that if you want a unit fast you avoid buying one direct from Palm via their store.

Duh!

I.M. Anonymous @ 5/3/2001 8:22:47 PM #
Palm's sales dropped in April because:

a) they announced new products in March (500 and 505) and
b) didn't ship anything till May!

They basically threw their April away because we were all waiting for the new models. If they had any brains they would have announced the new models on March 19 and shipped them April 1. That would have secured a pretty monster summer for them.
They even might have sold a few more of the old models in April when people started flooding the stores.

Maybe they'll get it together for the 700 series launch.... or maybe not!

RE: Duh!
I.M. Anonymous @ 5/4/2001 9:51:43 AM #
This is such a common occurence, there's even a Dilbert cartoon about it.
It should be a mystery to NOBODY why sales were slow in April. And I'll bet I can predict when
sales will improve: May! The PalmPilot mailing list is buzzing with folks who have been
rushing out to Office Depot to get their m505. These are most likely the "early adopters" who
will be the guinea pigs for the rest of us. If the screen turns out to be acceptible, sales will
skyrocket. Of course, the way Palm has been doing things recently, they will be caught off
guard and will build a huge backorder for these things. They'll be elated at the sales rebound,
but will lose stock value because they will report "parts shortages" because they didn't think
far enough ahead to build enough, and now they can't get parts fast enough to build more.

Just a guess here, but I'll wouldn't be surprised if this actually happened.

palm is going down

I.M. Anonymous @ 5/3/2001 8:29:05 PM #
palm is going down. the windows ce pdas are going to take over palm in sales within a couple of years. Palm is just making stupid mistakes and not keeping up with the pace in upgrades.

RE: palm is going down
I.M. Anonymous @ 5/3/2001 8:45:00 PM #
Please don't feed the trolls.

RE: palm is going down
I.M. Anonymous @ 5/3/2001 9:30:11 PM #
Palm may be experiencing slow times but the Windows CE won't take it over. Not when Windows CE SEVEN hardware platforms including HPC, HPC Pro, Palm PC, and Pocket PC which has three platforms including ...MIP, SH3, and StrongARM. Microsoft reminds me of the DOS days when you needed to check our the hardware before you could select and buy the software. At least the Palm community has stuck with the same processor device.....Motorola.

RE: palm is going down
I.M. Anonymous @ 5/3/2001 10:35:22 PM #
Palm won't go down because of the Palm OS. They'll either sell themselves to Sony, wo will carry the ball and bury that dumbass Bill Gates forever in the PDA market, or they'll be the next Sega, after they give up on making hardware beacuse of their inability to produce a competitiive product on time.

The reports I've seen in the last few days are a testament to this. The m500 and m505 are average at best. I'm tired of people convincing themselves that these PDAs are great simply because they're made by Palm.

The Palm OS is a great thing because it's shared with so many developers. Palm would rather have 10% of a $1000 pie over 100% of nothing.

Keep up the good programming, Palm. It's the only thing you've got going for you in this market.

RE: palm is going down
I.M. Anonymous @ 5/3/2001 10:49:03 PM #
"Please don't feed the trolls."

YOU JUST DID!!!

RE: palm is going down
pribbernow @ 5/3/2001 11:36:07 PM #
Pocket PC will never crush the Palm platform, because it lacks a critical advantage of PalmOS devices...sex appeal! Devices from Palm/Handspring/SONY are not just business tools, they are fashion statements. Sleek, elegant, stylish, and finely designed. They are made for easy wearability. PocketPC, on the other hand, while filled with impressive features, lacks the qualities that have made the name "PalmPilot" a household name.

PocketPC is going down
I.M. Anonymous @ 5/5/2001 1:57:14 PM #
Why does everyone automatically assume PocketPC will be around forever? Microsoft has been pouring money into the platform for at least 5 years now and I strongly doubt they've made any money on it yet.

Palm advertises it has some something like 10 million units. Microsoft has about 10% of the market and they make about $10 per unit in licence fees. So MS has about $10 million in revenue in about 5 years. I wish I knew how much money they'd spent developing and advertising CE/PPC over the years but I'd bet you dollars to donuts that it was way, way over $10 million.

Microsoft has a lot of money but they can't afford to fund every struggling product forever. Remember Microsoft Bob? They will kill failing products.

Sometimes it doesn't matter how good the product is. If it isn't successful in the marketplace, it dies.

-RobZombie

RE: palm is going down
I.M. Anonymous @ 5/5/2001 2:17:45 PM #
Contrary to the post quoted below, PocketPC is very much alive and well, and is going to be expanding market share at Palm's expense.

Palm has made a series of unbelievable blunders over the past two years, and in particular over the past 4 months. They are using relatively primitive equipment that has not been significantly updated in 4 years. The Sony CLIE N710C is the only new PalmOS PDA worth buying, and may end up being what saves Palm from extinction.

Palm makes about 5% of its revenues from OS licensing, so people who suggest they can afford to get out of the hardware business don't nnow what they are talking about. Going through their models, we have:

m100 - entry level, low markup, minimal profit but high sales.

m105 - modest markup, good sales.

IIIc - lower markup (prices recently slashed in an attempt to clear out remaining inventory before m505 release), poor sales.

Vx - high markup, good sales but sales decreased after m50x announcements and now will be discontinued, leaving millions of dollars lost in unsold inventory.

VIIx - high markup, low sales, needed to keep a preliminary wireless strategy going. Will be abandoned in 2 months when m700 series released, using a different wireless strategy.

m500 - high markup, low sales predicted by industry experts.

m505 - high markup, high sale had been predicted, however this is now in question due to Palm's miscalculations regarding relative importance of screen contrast/brightness vs. battery life. (Most customers would have chosen a nicer screen at the expense of battery life, but Palm marketers seemed to be very concerned that their PDAs were becoming more similar to PocketPCs in terms of battery life.)

Palm is losing millions daily and recently cancelled plans for an extravagant new headquarters (what were they thinking?). Silicon Valley is slumping and a lot of naysayers have made self-fulfilling prophecies about sales, which have (overnight) slaughtered Palm's stock price. (Makes you wonder if Gates pays these "analysts" that have been slamming Palm...)

Now factor into this the price war that is about to be waged among manufacturers, and you'll see Palm, Inc. isn't in a very good position. The fact that they have survived despite years of mismanagement is a testament to the brilliance of the original design and the elegance of the Palm OS.

Microsoft is the most powerful company in the world and could have easily bought Palm with the money Gates has in his "petty cash" jar. What's surprising is that they haven't yet started flooding the market with
inexpensive (subsidized) PocketPCs to gain market share. In any event, with the release of the new PocketPC4, they might start showing Palm how aggressive Microsoft can be when they decide to play hardball. Palm is wounded and hemorrhaging cash profusely. It would be very unlike Microsoft to not
seize this opportunity to move in for the kill.

I have read rumors that either Sony or Microsoft will be buying Palm this year. The way things are going for Palm, they may soon be of no concern to Microsoft.

_______________________________________________________
Original post:

Why does everyone automatically assume PocketPC will be around forever? Microsoft has been pouring money into the platform for at least 5 years now and I strongly doubt they've made any money on it yet.

Palm advertises it has some something like 10 million units. Microsoft has about 10% of the market and they make about $10 per unit in licence fees. So MS has about $10 million in revenue in about 5 years. I wish I knew how much money they'd spent developing and advertising CE/PPC over the years but I'd bet you dollars to donuts that it was way, way over $10 million.

Microsoft has a lot of money but they can't afford to fund every struggling product forever. Remember Microsoft Bob? They will kill failing products.

Sometimes it doesn't matter how good the product is. If it isn't successful in the marketplace, it dies.

-RobZombie



RE: palm is going down
I.M. Anonymous @ 5/5/2001 3:23:00 PM #
Gotta agree with you 100%. Palm is in big trouble, and the m505 probably won't save them like they had hoped. I'll bet they revise the contrast settings and/or issue a recall within a week. The longer they let this m505 screen fiasco go, the more it's going to cost them in the long run (remember the IIIc nightmare?).

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