Palm makes its excuses for losses

Pre manufacturer Palm is partially blaming its mounting losses on the move of its webOS mobile platform to a subscription-based payment model.

The struggling mobile phone manufacturer turned in its ninth quarterly loss in a row as it continued to invest heavily in trying to turn its business around and win mindshare in an increasingly competitive market.

The company made unadjusted net losses of $164.5 million for its first fiscal 2010 quarter compared with net losses of $41.9 million in the year ago period. Revenues fell by 82 per cent to $68 million.

Adjusted net losses amounted to $13.6 million, however, compared with $12.8 million in the year ago quarter.

The accounting adjustments related in part to the subscription-based nature of the Palm webOS, on which the Palm Pre device is based. Accounting rules require the company to recognise revenues and the direct cost of revenues over the product's estimated life of 24 months rather than upfront.

Palm will be hoping that the Pre will spearhead a revival in its fortunes and enable it to take on rivals such as Apple's iPhone and RIM's Blackberry. It indicated that it was seeing stronger than expected demand for the product in the business community.

After going on sale in the US in June this year, the Pre is also due to be launched in the UK in conjunction with O2, the country's largest mobile network provider, later this year.

But despite the European release and the fact that the company's next fiscal quarter will cover the busy Christmas period, Palm indicated that it expected revenues to drop as low as $240 million in the next quarter due to falling sales of legacy products - a statement that is bound to worry financial analysts.

18 Sep 2009