Palm, Inc. reported today that their total revenue in the second quarter of fiscal year 2009, which ended November 28, 2008, was $191.6 million. Smartphone sell-through for the quarter was 599,000 units, down 13 percent year over year. Smartphone revenue was $171.0 million, down 39 percent from the year-ago period.

From the press release:

"We're working through an undeniably difficult period," said Ed Colligan, Palm president and chief executive officer, "but near-term challenges shouldn't overshadow the fact that we are on track to deliver a breakthrough new platform and products that will bring a truly differentiated smartphone experience to our customers and reestablish Palm as a leading innovator in the mobile industry."

Palm had announced at the first of the month that they expected to have declines in Q2 FY09. Palm mentioned again today that they are restructuring their worlwide operation and implementing several other cost-savings initiatives.

Ed Colligan said:

In an environment like we're seeing today, the best thing we can do for our shareholders is to maintain discipline and execute against our long-range strategic plan..."

The second quarter of fiscal year 2009 net loss applicable to common shareholders included a non-cash charge with a net impact of $396.7 million to the tax provision pertaining to the increase of the valuation allowance for the Company's U.S. deferred tax assets. This non-cash charge was the primary driver of a net loss applicable to common shareholders for the second quarter of fiscal year 2009 of $(508.6) million, or $(4.64) per diluted common share on a GAAP basis. The increase in the valuation allowance does not reflect a change in Palm's outlook, nor does it alter the company's ability to utilize the underlying net operating loss carry forwards.

"We have reserved against these assets in accordance with GAAP, however we still expect to utilize our net operating loss to offset future U.S. cash taxes once we become profitable," said Andy Brown, chief financial officer.

Regarding product development, Ed Colligan said that Palm is maintaining their stride on the product development front and that their new platform is nearing completion.

Our "next gen" phone is set for launch in the first half of calendar year '09 as planned.

Palm said that the Treo Pro has helped in increasing the gross margin. Palm announced that the Treo Pro would be coming to a new carrier partner this quarter.

Ed Colligan was asked about Palm's handhelds, and he said that Palm handhelds continue to sell and have been selling well this holiday season. Colligan said that Palm doesn't plan to make any new handhelds and there is an inevitable end, but that they will continue to sell them as long as there is a demand for them.

Colligan said that the new platform is still on schedule and Palm should return to profitability in 2010. When asked why the public would be receptive to new products from the upcoming platform, Colligan said that "the best is yet to come" in the smartphone space in general. He said that he believes Palm can be one of the strong players in the smartphone market.

"For the rapidly expanding consumer market, we think Palm's breakthrough new platform will bring a truly differentiated experience to users..."

Colligan said that their upcoming Operating system will be targeted at consumer applications and that the Windows Mobile will continue to be targeted at business applications.

Palm said that they have the following Competitive Advantages:

• Ability to develop hardware and software in tandem and integrate them seamlessly
• Palm owns the elements of the architecture to support the growing number of applications and services
• Palm has an established developer "ecosystem" excited to work with their new platform

Sounds like Palm is confident in moving forward into the new year. Hopefully they will return to profitability in 2010. It will be very interesting come January 8th in Las Vegas when Palm announces their big news. I can't wait to hear all about it. Dieter, our esteemed Editor in Chief, will be there and will be reporting live, so be sure to stay tuned!

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