Phone
Palm dropped 65 cents to $13.79 at 10:19 a.m. New York time on the Nasdaq Stock Market, and earlier declined as low as $13.76. The shares had more than quadrupled this year on anticipation that the Pre would boost sales.
The phone, released in June, isnt generating the sales that some investors anticipated. Revenue, including sales recognized over the life of phones, will be $240 million to $270 million this quarter, Palm said yesterday. Analysts had projected revenue of $305.9 million on average, according to a Bloomberg survey.
“We still dont know where we are in this turnaround,” said Peter Misek, an analyst at Canaccord Adams in Toronto. He recommends selling the stock. “Theyre still losing money, and more importantly, next quarter is going to be awful.”
The first-quarter net loss widened to $164.5 million, or $1.17 a share, from $41.9 million, or 39 cents, a year earlier, Palm said.
Chief Executive Officer Jon Rubinstein is counting on the Pre to pull the company out of a two-year sales slump. Palm is boosting spending on marketing this quarter as it takes on Apple Inc.s iPhone and Research In Motion Ltd.s BlackBerry.
Palm also said yesterday that it will raise money by selling 16 million shares. Elevation Partners, a private-equity firm that has invested $425 million in the company, may buy $35 million of stock in the offering.
Phone Sales
Palm said it shipped 823,000 smart phones in the period ended Aug. 31, without saying how many of those were the Pre. Analysts had predicted 738,000, according to Matt Thornton at Avian Securities LLC in Boston.
Rubinstein, 53, ran the iPod business at Apple before joining Palm in 2007. He is trying to return the company to profitability after earlier products, such as the Centro and Treo, failed to compete with the iPhone and BlackBerry.
Like the iPhone, the Pre lets customers surf the Internet on a touch screen. It also has a slide-out keyboard, making it easier to type e-mails. Sprint Nextel Corp., the third-biggest U.S. mobile-phone operator, is the exclusive domestic carrier for the Pre.
Palm expects to sell phones with additional carriers in the second half of the fiscal year.