Palm Sees Large Drop In Revenue, Loses $506 Million

The once-dominant PDA maker posted its sixth consecutive quarterly loss but is pinning its comeback hopes on the Nova operating system.
Palm continues to struggle in the smartphone market, but the company said its next-generation operating system could help it win back customers.

The smartphone maker Thursday posted a net loss of $506.2 million for its second quarter of fiscal year 2009, primarily because of a $396 million write-down of deferred tax assets. The company saw its smartphone revenue plummet to $171 million, down 39% from a year ago.

The company's Centro smartphone was long a bright spot, but it saw decreased sales as the global economy faltered, and Apple and Research In Motion released less-expensive, more-sophisticated smartphones. Palm saw smartphone shipments decrease 13% for the quarter.

"We're working through an undeniably difficult period," said Ed Colligan, Palm's president and CEO. "But near-term challenges shouldn't overshadow the fact that we are on track to deliver a breakthrough new platform and products that will bring a truly differentiated smartphone experience to our customers and re-establish Palm as a leading innovator in the mobile industry."

To overcome its string of losses, the company is set to unveil its Nova operating system and new handsets next month at the Consumer Electronics Show in Las Vegas. Palm hasn't revealed many details, but executives have said the new OS will be focused on the mobile Internet.

With Apple and RIM dominating the U.S. smartphone market with the iPhone and the BlackBerry, Palm said it will be aiming for the "fat middle of the market." Colligan said Nova is almost completed, and it's on track to be delivered in the first half of 2009.

"By fiscal 2010, we're optimistic that we'll see the success of our new products positively impact our income statement," Colligan said in a conference call.

On the enterprise side, the company said it will continue to push handsets with Microsoft's Windows Mobile like the Palm Treo Pro. The Treo Pro was released unlocked earlier this year for more than $500, but Palm said the handset will be picked up by a major U.S. carrier in the first half at 2009 and will probably be subsidized.