Poor Pre and Pixi sales put Palm on deathwatch

The news that Palm made a $22 million loss over the last three months has prompted many pundits to put the company on deathwatch.

The information came from a routine announcement about its earnings made late on Friday (UK time) and it resulted in a 25% drop in Palm’s US share price. This put it below $5 for the first time since January 2009, when shares rocketed from a low of $1.42 to almost $9 in the days following the Palm Pre announcement at CES. After peaking at just over $17 in September last year, the share price has dropped to just over $4 when the markets closed on Friday.

Poor sales are obviously part of the problem and while Palm shipped 960,000 smartphones to distributors earlier this year, less than half that amount were actually sold to customers. One analyst has even gone so far as to calculate than Palm may actually have more than one million smartphones sitting unsold, but whatever the case, even the best-case of 525,000 unsold inventory doesn’t bode well when the competition is elbow-deep in developing its next generation of devices.

The consensus seems to be that Palm squandered the momentum it gained from the incredible CES 2009 Pre announcement by not actually launching the smartphone until some six months later. By the this time, the iPhone 3GS was almost with us and there are no prizes for guessing which smartphone people were more excited about by this point.

Hardware and software issues also dogged the Palm Pre, as did the lack of an SDK from the get-go, which meant that webOS apps were thin on the ground for quite some time. Some to’ing and fro’ing with iTunes also didn't do much to help the perception of the Pre, nor, frankly, did the decision to launch the feature-reduced Pixi to draw attention away from the significantly superior Pre.

So, a vast unsold inventory and a huge quarterly loss don’t add up to a rosy future for Palm, at least in the short term, and the expectation is that an acquisition will be the best that it can hope for.

We’d love Palm to turn its fortunes around and the rumoured UK launch of the Pre Plus and Pixi Plus in a few weeks’ time may is something to look forward to, but we doubt that Palm can shift enough handsets in sufficient time to make a difference to its present situation.

[via Engadget and Ars Technica]