Palm Pre Buzz Not Enough To Save Palm?

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More than half the phones Palm made this year are still in warehouses, and analysts say “sell”

Despite a favourable reaction to the Pre phone in 2009, poor financial results from smartphone maker Palm look like they could spell disaster for the company.

Palm made a net loss of $22 million in the first three months of 2010 because, although the Pre was a success by any standards (and has done better than Google’s Nexus One), it didn’t do well enough against Android phones, the iPhone and Blackberry devices.

Good reviews but not enough Pre presence

Launched in 2009, the Palm Pre was billed as the company’s hope to return to its glory days when it led the way with mobile devices such as personal digital assistants (PDAs). It had good reviews, and sold fast on its launch.

It sold 408,000 in the first quarter of 2010, however. This is considerably less than the 600,000 which analysts had been hoping for, and leaves a lot of phones in warehouses, since it made 900,000 phones. It sold 29 percent fewer phones in the last quarter than in the previous quarter, and only achieved five percent of the iPhone’s sales.

Among the problems holding the Pre back is the fact that it uses WebOS, an operating system from Palm which is not in use in phones from any other vendor. Only Apple has been able to establish this kind of single vendor phone market, as other operating systems including Symbian, Android and Windows Phone, are available on multiple phones from different vendors.

Palm had already scaled back its revenue forecast in February, but the results sent Palm’s stock price tumbling, and led to speculations about the company’s future. “The death spiral is accelerating,” said Morgan Joseph analyst Ilya Grozovsky, according to the WSJ Newswire. Grozovsky recommends selling Palm shares.

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