It's been a tough year for Palm. The company is betting everything on its new handsets, the Pre and the Pixi - but with sales not doing as well as expected, the company issued a profit warning yesterday.
To explain what was happening, chairman and chief executive Jon Rubinstein sent out a memo to the company's staff.
As is typical with these things, it was largely stuffed with corporate speak and coded messages - so I've come up with this handy paragraph-by-paragraph translation that might help explain what Palm thinks is going on.
Team,
Hey guys! Whatever I say, don't forget we're in this together.
This morning we announced preliminary results for our 2010 third quarter. Since the quarter has not yet closed, it is too soon to offer exact numbers, but we stated that we expect to report revenues for Q3 between $300 and $320 million.
We're not selling as many phones as we thought we would: sales were flat despite the fact that we started selling handsets with Verizon - America's second-biggest phone network (with 91m users) - in January.
We were expecting sales to go up. They didn't. This could be awkward.
We also announced that we expect our revenue for this fiscal year to fall below the guidance we gave to Wall Street, which ranged from $1.6 to $1.8 billion.
Given how sales have gone over so far, we'd probably need to double our sales in the next three months to satisfy our original targets. Let's be honest, that's not happening, is it?
As we mentioned in our press release, our softer than expected performance is due to slower than expected customer adoption of our products, which in turn has prompted our U.S. carrier partners to put additional orders on hold for the time being.
People aren't buying enough of our phones. And networks don't want to order phones that people aren't buying.
On a positive note, we expect to exit the quarter with over $500 million in cash on our balance sheet. We're scheduled to announce our full financial results in March.
(Before we go on, I'm going to sugar the pill. Over the past year or two we've been burning through our cash reserves like crazy - having some money in the bank buys us some more time. That's awesome news!)
I realize this news is difficult to swallow. We made this announcement today to prevent a surprise for Wall Street when we announce quarterly earnings in March.
Yes, it sucks - but the pain you feel today is nothing compared to the pain you would have felt if we'd suddenly announced in a few weeks that we'd missed our targets by 30%.
In the meantime, the entire executive team has been working extremely hard to improve product performance, and have implemented a number of initiatives to increase awareness and drive sales.
We've been trying to work out what's gone wrong...
Dave Whalen and I just returned from a very successful meeting with Verizon Wireless, where they acknowledged that their execution of our launch was below expectations and recommitted to working with us to improve sales.
...and we've decided it was Verizon's fault.
To accelerate sales, we initiated Project JumpStart nearly three weeks ago. Since then, nearly two hundred Palm Brand Ambassadors, supplemented by Palm employees from Sunnyvale, have been training Verizon sales reps across the U.S. on our products.
In fact, we think they've done such a bad job that we're trying to school them so that they actually know what our products do. Plus, we gave it a cool name that implies we're taking action!
Early results from the stores have already shown improvement on product knowledge and sales week over week. You may have also seen a growing number of Palm ads on billboards, bus shelters, buses, and subway stations—all getting the word out about Palm.
Not many people know we exist - but when they know we exist, we sell a few more handsets. That's got to be positive, right?
All of these efforts are examples of how we are working to accelerate adoption and grow distribution of webOS. In the next few weeks, your management will work with you to make sure your priorities are laser-focused, primarily on helping to increase sales, improve product quality and differentiate the Palm product experience.
We need to get better at a few things - largely the "making things" part, and then the "selling things" part. Perhaps some of you haven't been as focused as you need to be (yeah, I'm talking to you).
Our goals are taking longer than expected to achieve, but I am still confident that our talented team has what it takes to get the job done.
I'm not firing anyone... yet.
We'll schedule an all-hands meeting after our earnings announcement in March, and I'll be happy to answer your questions.
Give me a few weeks to prepare before asking me anything.
Go team!!!
jon
I secretly watch lots of cheerleader movies.
