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late Wednesday. While anecdotal data are all over the lot about what's happening with handheld (PDA) sales this quarter, Palm came in with a slightly better quarter than many expected -- and repeated its earlier guidance for the second quarter, which ends Friday.
That guidance is for a loss of 7 cents per share, with total revenue between $250 million and $280 million. As predicted here in the
Columnist Conversation earlier this week, Palm also announced more layoffs -- about 250 workers, 15% to 20% of its staff -- leaving a final headcount of about 1,100 employees and 100 or so contractors.
Losing 7 cents a share in a hot market like PDAs isn't good, of course, but after Palm's
, anything that keeps it in business must look pretty good from inside Fortress Palm. With CEO Carl Yankowski's departure a few weeks ago, the company wants to present itself as finally getting beyond its problems: inventory overhang, lackadaisical and slow-moving management, delayed new-product development and an aging and in many ways uncompetitive product line.
Wednesday's report may be a start, albeit a small one, on that path to recovery. But I'm highly skeptical.
While Palm has apparently cleaned up some of its immense obsolete-inventory problem, the old stuff still hasn't gone away. It still has too many employees for a company its size. And it has those behind-the-curve products, its deepest-seated and most intractable problem.
If buyers want a full-function PDA, they probably buy either the
iPaq or the
Jornada, the best of the PocketPC-operating system PDAs. If buyers prefer the generally lighter, thinner form of a Palm-operating system PDA, they probably buy a
Edge, Pro, Neo or Platinum -- or maybe one of the several elegant, high-resolution but expensive
Uh, Palm? Well, yes, maybe they buy a Palm. But in side-by-side comparisons, Palm's models come off badly next to the Handsprings and Clies.
What Lies Ahead
That's the real burden Palm carries into the rest of this Christmas buying season and into the new year: The other guys' stuff is better and sometimes cheaper.
Palm made a halfhearted play over the past year to get into the corporate market, which it had never much cultivated. Unfortunately, that market is now seeing the new
PocketPC-based PDAs, particularly the iPaqs and Jornadas, as the first "corporate PDAs" -- principally because of their superior connectivity options for accessing company databases and email. Palm has few strengths in that matchup and many shortcomings: It still produces PDAs mainly for individuals' purchases.
The past year has been a long, ugly slide for Palm shares -- from almost $60 around this time last year to Wednesday's close at $3.41. Yes, the stock is up from a buck and a half in early October, but aside from a likely small pop Thursday in response to Wednesday's report (echoing a 23-cent gain in after-hours trading Wednesday), I don't think Palm is headed for a big Christmas selling season, nor much of a recovery in share price.
A Long Downward Spiral
Call it a ho-hum Christmas, not a ho-ho one.
Unless and until Palm solves its structural problems, it remains damaged goods for investors ... and maybe fire-sale bait for its competitors.
Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, neither Seymour nor Seymour Group held positions in any securities mentioned in this column, although holdings can change at any time. Seymour does not write about companies that are, or have been recently, consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites you to send your feedback to