Palm Sales Nose-Dive in Anticipation of Pre Smart Phone

With a successful Consumer Electronics Show (CES) launch of its upcoming Pre smart phone now well behind it, industry pioneer Palm is facing an increasingly uncertain period as customers hold off from buying any of its current products. The company announced a year-over-year revenue drop of 72 percent for the quarter ending February 27, 2009, during which time it lost $98 million. Palm also noted that the losses would continue at least until the Pre arrives mid-year.

"We're poised to usher in a new era at Palm," said Palm CEO and president Ed Colligan. "We're proceeding through a challenging transitional period. However, our current results shouldn't overshadow the tremendous progress we've made against our strategic goals."

The problem for Palm is that even the eagerly awaited Pre is shrouded in questions, and it's not clear that this one product launch will turn things around for the company. Palm refuses to discuss pricing for the Pre, noting only that the market can sustain an all-in-one device that falls somewhere between Apple's and RIM's successful products. How the product will work in the real world remains unclear as well.

And so far, the company has announced only one wireless carrier: the lackluster US-based Sprint Nextel. (Sprint is consistently rated as the worst or near-worst US wireless carrier, which could further dampen enthusiasm for the Pre.) Palm says it's negotiating with European carriers as well, however, and presumably the Pre will be sold by other wireless carriers in the United States over time.

Palm cautions that this one hardware product isn't the sole focus of its efforts. Instead, the company points to the WebOS behind the Pre and says that it will form the foundation for a number of devices going forward. Those products remain a mystery, however.

That said, it's unclear whether Palm can even survive a disastrous Pre launch. The company had to sell half of a recent investment to raise additional cash and now has just $219.4 million in cash and equivalents on hand

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