The last week has seen some potential gains for Palm, with Sprint expanding employee training and news that Canada and Australia could be next to adopt the new webOS handset. However, the outlook has not been all rosy. Palm could be facing an uphill battle leading up to the release of the Pre. We review a couple issues including supply and demand, poor quarterly numbers by Sprint, and skeptical analysts.
Possible Pre shortages; issues with suppliers, price = DOA?
Palm could face a serious supply crunch if their new webOS device flies off store shelves, Bloomberg suggests. According to six analysts, the median estimate of Pre stock at launch will be about 375,000. This is in comparison to Apple's 1 million 3G iPhones that sold in only three days after launch. Sprint employees have already been told to wait a few months before buying a Pre for themselves, reports PreCentral.
In addition, "the Pre has to live up to the hype or else they'll lose their momentum to rival products," states an analyst from Gartner, Inc, possibly referring to a new iPhone model that could be unveiled at the Apple WWDC on June 8th.
As for their supplier, rumored Taiwan-based Chi Mei, they could be experiencing some manufacturing issues due to little experience with mobile devices, TamsPalm notes. Collins Stewart analyst Ashok Kumar elaborates via CNBC, stating that "due to multiple hardware and software issues, Palm has dramatically reduced its production orders for Pre with its ODM partner." Smartphone growth has also been slowing, while the playing field has become more crowded with competitors.
Palm also needs to tread lightly on the issue of pricing; previous reports had the device pegged at $300, but recent reports predict it could be as low as $150 after rebate. "If Sprint does not match or beat AT&T's subsidized iPhone price of $199...the Pre is DOA", Kumar warns.
Sprint posts $594M quarterly loss ahead of Palm Pre
Sprint has recently been absorbing heavy losses, as has Palm, with their net losses expanding from $505 million last year to $594 this quarter, an 18 percent drop. They also dropped off 182,000 subscribers this year, down to 49.1 million.
This is certainly not new; they have been shedding revenue and subscribers for some time; however Electronista notes that member losses have been slowing as of late. The increased retention was largely due to Sprint pushing their $50 unlimited plan on Boost Mobile.
Company cash flow has also been increasing, which bodes well for Sprint readying for the Pre for a possible June 7th release date. "We generated more than enough cash...to pay all of our 2009 debt maturities," states Sprint CEO Dan Hesse. Could their accelerating Palm Pre ad campaign pay off for them in the end?
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