Palm Inc. (PALM, Financial) filed Quarterly Report for the period ended 2009-11-27.
Palm, Inc., a leader in mobile computing, strives to put the power of computing in people's hands so they can access and share their most important information. The company's products include smartphones, under the Treo brand; mobile managers, under the LifeDrive brand; handheld computers, under the Tungsten and Zire brands; as well as software and accessories. Palm products are sold through select Internet, retail, reseller and wireless operator channels throughout the world, and at Palm Retail Stores and Palm online stores. Palm Inc. has a market cap of $1.67 billion; its shares were traded at around $10.28 with and P/S ratio of 2.3.
We hold a variety of interest-bearing auction rate securities, or ARS, that represent investments in pools of assets, including preferred stock, collateralized debt obligations, credit-linked notes and credit derivative products. With the exception of our ARS investments in credit-linked notes, our investments in ARS do not currently have a readily determinable market value because they are not currently trading nor have we observed sufficient market inputs. As of November 30, 2009, the par value of our investments in ARS, excluding those representing investments in pools of credit-linked notes, was $54.7 million and the estimated fair value was $4.1 million.
Revenues for the three months ended November 30, 2009 decreased 59% from the three months ended November 30, 2008. Smartphone revenues were $76.1 million for the three months ended November 30, 2009, a decrease of 55% from $171.0 million for the three months ended November 30, 2008. Handheld revenues decreased $18.6 million as we wound down our handheld product line in order to focus our efforts on our new Palm webOS smartphone products. During the three months ended November 30, 2009, net smartphone units shipped were 783,000 units at an average selling price of $375 per unit. During the three months ended November 30, 2008, net smartphone units shipped were 556,000 units at an average selling price of $305 per unit. Revenues were favorably impacted by an increase of 54 percentage points resulting from the higher net device unit shipments and accessories sales and an increase of 23 percentage points resulting from an increase in average selling prices. These increases were more than offset by the effect of accounting for shipments of Palm webOS products under subscription accounting, which resulted in a decrease of 132 percentage points. The increase in net smartphone unit shipments is primarily a result of the launches of Palm Pre internationally and Palm Pixi in the United States. The increase in our average selling price is primarily the result of the introduction of Palm Pre, which carries a higher average selling price, and a shift in product mix, reflecting fewer Centro smartphone unit shipments, which carry lower average selling prices.
Revenues for the six months ended November 30, 2009 decreased 74% from the six months ended November 30, 2008. Smartphone revenues were $143.4 million for the six months ended November 30, 2009, a decrease of 72% from $504.7 million for the six months ended November 30, 2008. Handheld revenues decreased $51.1 million as we wound down our handheld product line in order to focus our efforts on our new Palm webOS smartphone products. During the six months ended November 30, 2009, net smartphone units shipped were 1,606,000 units at an average selling price of $402 per unit. During the six months ended November 30, 2008, net smartphone units shipped were 1,726,000 units at an average selling price of $291 per unit. Revenues were favorably impacted by an increase of 38 percentage points resulting from an increase in average selling prices, partially offset by a decrease of 7 percentage points resulting from the lower net smartphone unit shipments and accessories sales. This net increase was more than offset by the effect of accounting for shipments of Palm webOS products under subscription accounting, which resulted in a decrease of 103 percentage points. The increase in our average selling price is primarily the result of the introduction of Palm Pre, which carries a higher average selling price, and a shift in product mix, reflecting fewer Centro smartphone unit shipments, which carry lower average selling prices. The decrease in net device unit shipments is primarily due to lower unit volumes as a result of reduced demand for our legacy smartphone products and a challenging economic environment, partially offset by the launches of our Palm webOS products during the first half of fiscal year 2010.
The increase in cost of revenues as a percentage of revenues due to subscription accounting was partially offset by a decrease related to period costs, which include costs such as warranty and related service costs, freight, scrap and rework costs, the cost of excess or obsolete inventory, supply chain personnel related costs, amortization of acquired technology, depreciation and allocated information technology and facilities costs. For the three months ended November 30, 2009, these period costs, which are not directly related to net unit shipments, decreased $19.9 million as compared to the three months ended November 30, 2008, primarily due to the following factors. We experienced a decrease of $18.5 million related to lower costs for purchase commitments with third-party manufacturers, for excess and obsolete inventories and for decreased scrap and rework costs. We experienced a decrease of $5.1 million related to warranty costs during the three months ended November 30, 2009 as compared to the year-ago period, which is primarily due to fewer units under warranty as a result of lower legacy shipment volumes. These decreases were partially offset by an increase in technical service costs of $1.8 million as a result of higher call volumes of Palm webOS products primarily due to an increase in volumes associated with product launches. We experienced an increase in supply chain personnel related costs of $1.1 million due to an increase in our average supply chain headcount. We experienced an increase in freight and shipping charges of $0.6 million due to an increase in expedited shipments for the three months ended November 30, 2009 as
Read the The complete ReportPALM is in the portfolios of Richard Perry of Perry Capital, Lee Ainslie of Maverick Capital, John Griffin of Blue Ridge Capital, Andreas Halvorsen of Viking Global Investors LP, Jeremy Grantham of GMO LLC.
Palm, Inc., a leader in mobile computing, strives to put the power of computing in people's hands so they can access and share their most important information. The company's products include smartphones, under the Treo brand; mobile managers, under the LifeDrive brand; handheld computers, under the Tungsten and Zire brands; as well as software and accessories. Palm products are sold through select Internet, retail, reseller and wireless operator channels throughout the world, and at Palm Retail Stores and Palm online stores. Palm Inc. has a market cap of $1.67 billion; its shares were traded at around $10.28 with and P/S ratio of 2.3.
Highlight of Business Operations:
We are currently evaluating the requirements of these updates and have not yet determined the impact on the condensed consolidated financial statements, but we expect the impact of adoption to be material. We currently recognize Palm webOS product revenues and direct product costs on a straight-line basis over the currently estimated economic life of the product of 24 months. As of November 30, 2009, total deferred revenues were $550.8 million and total deferred cost of revenues were $332.7 million. We believe that adoption of these updates will result in the immediate recognition of a substantial portion of these deferred revenues and all of these deferred cost of revenues. The remaining Palm webOS revenues, which are related to future services and deliverables, will be recorded as deferred revenues on our condensed consolidated balance sheets, and amortized into earnings on a straight-line basis over the estimated economic product life. Further, for Palm webOS products delivered after the adoption of these updates, we expect that we will recognize a substantial portion of the product revenues and all of the direct product cost of revenues at the time of delivery, with the remainder of the product revenues being recognized over the estimated economic life of the product.We hold a variety of interest-bearing auction rate securities, or ARS, that represent investments in pools of assets, including preferred stock, collateralized debt obligations, credit-linked notes and credit derivative products. With the exception of our ARS investments in credit-linked notes, our investments in ARS do not currently have a readily determinable market value because they are not currently trading nor have we observed sufficient market inputs. As of November 30, 2009, the par value of our investments in ARS, excluding those representing investments in pools of credit-linked notes, was $54.7 million and the estimated fair value was $4.1 million.
Revenues for the three months ended November 30, 2009 decreased 59% from the three months ended November 30, 2008. Smartphone revenues were $76.1 million for the three months ended November 30, 2009, a decrease of 55% from $171.0 million for the three months ended November 30, 2008. Handheld revenues decreased $18.6 million as we wound down our handheld product line in order to focus our efforts on our new Palm webOS smartphone products. During the three months ended November 30, 2009, net smartphone units shipped were 783,000 units at an average selling price of $375 per unit. During the three months ended November 30, 2008, net smartphone units shipped were 556,000 units at an average selling price of $305 per unit. Revenues were favorably impacted by an increase of 54 percentage points resulting from the higher net device unit shipments and accessories sales and an increase of 23 percentage points resulting from an increase in average selling prices. These increases were more than offset by the effect of accounting for shipments of Palm webOS products under subscription accounting, which resulted in a decrease of 132 percentage points. The increase in net smartphone unit shipments is primarily a result of the launches of Palm Pre internationally and Palm Pixi in the United States. The increase in our average selling price is primarily the result of the introduction of Palm Pre, which carries a higher average selling price, and a shift in product mix, reflecting fewer Centro smartphone unit shipments, which carry lower average selling prices.
Revenues for the six months ended November 30, 2009 decreased 74% from the six months ended November 30, 2008. Smartphone revenues were $143.4 million for the six months ended November 30, 2009, a decrease of 72% from $504.7 million for the six months ended November 30, 2008. Handheld revenues decreased $51.1 million as we wound down our handheld product line in order to focus our efforts on our new Palm webOS smartphone products. During the six months ended November 30, 2009, net smartphone units shipped were 1,606,000 units at an average selling price of $402 per unit. During the six months ended November 30, 2008, net smartphone units shipped were 1,726,000 units at an average selling price of $291 per unit. Revenues were favorably impacted by an increase of 38 percentage points resulting from an increase in average selling prices, partially offset by a decrease of 7 percentage points resulting from the lower net smartphone unit shipments and accessories sales. This net increase was more than offset by the effect of accounting for shipments of Palm webOS products under subscription accounting, which resulted in a decrease of 103 percentage points. The increase in our average selling price is primarily the result of the introduction of Palm Pre, which carries a higher average selling price, and a shift in product mix, reflecting fewer Centro smartphone unit shipments, which carry lower average selling prices. The decrease in net device unit shipments is primarily due to lower unit volumes as a result of reduced demand for our legacy smartphone products and a challenging economic environment, partially offset by the launches of our Palm webOS products during the first half of fiscal year 2010.
The increase in cost of revenues as a percentage of revenues due to subscription accounting was partially offset by a decrease related to period costs, which include costs such as warranty and related service costs, freight, scrap and rework costs, the cost of excess or obsolete inventory, supply chain personnel related costs, amortization of acquired technology, depreciation and allocated information technology and facilities costs. For the three months ended November 30, 2009, these period costs, which are not directly related to net unit shipments, decreased $19.9 million as compared to the three months ended November 30, 2008, primarily due to the following factors. We experienced a decrease of $18.5 million related to lower costs for purchase commitments with third-party manufacturers, for excess and obsolete inventories and for decreased scrap and rework costs. We experienced a decrease of $5.1 million related to warranty costs during the three months ended November 30, 2009 as compared to the year-ago period, which is primarily due to fewer units under warranty as a result of lower legacy shipment volumes. These decreases were partially offset by an increase in technical service costs of $1.8 million as a result of higher call volumes of Palm webOS products primarily due to an increase in volumes associated with product launches. We experienced an increase in supply chain personnel related costs of $1.1 million due to an increase in our average supply chain headcount. We experienced an increase in freight and shipping charges of $0.6 million due to an increase in expedited shipments for the three months ended November 30, 2009 as
Read the The complete ReportPALM is in the portfolios of Richard Perry of Perry Capital, Lee Ainslie of Maverick Capital, John Griffin of Blue Ridge Capital, Andreas Halvorsen of Viking Global Investors LP, Jeremy Grantham of GMO LLC.
