Will Palm survive until the Pre launch?

Palm on Tuesday issued the kind of preliminary earnings data that illustrates just how much the company depends on a successful Pre launch for its continued survival -- and how much the firm is betting on a win for the wildly anticipated smartphone.

The company says that for the third quarter of 2009, which ended for Palm on February 27, it expects to report revenues of between $85 million and $90 million. Operating expenses were between $95 million and $100 million. Factors cited included late shipment of the Treo Pro and the general economic situation.

But the company also cited "reduced demand for Palm's maturing legacy smartphone products" -- a significant nod to the effect the Pre announcement has had on the market for Palm's older, non WebOS-based models.

That's not a surprise, but another looming Pre effect on revenue reports is. Palm said in its statement that it will "recognize the revenues and cost of revenues associated with Palm webOS product sales on a straight-line basis over the product's estimated economic life of 24 months. The company will be recording deferred revenues and deferred cost of revenues on its balance sheet, and amortizing them into earnings on a straight-line basis over the estimated economic product life of 24 months."

That's an accounting treatment and has no effect on actual cash flow, but it won't exactly soothe the nerves of itchy investors.

This quote probably won't either: "Although Palm believes it has sufficient cash, cash equivalents and short-term investments to meet its working capital needs under its current operating plan, the company intends to strengthen its working capital position given the challenging economic environment and the opportunity to drive both the launch of the Palm Pre and future product-development efforts. The company is currently evaluating options in this regard, including the exercise of its right to direct the remarketing of a portion of the common shares underlying the Series C preferred stock and warrant units owned by Elevation Partners. Palm is entitled to retain any net profits realized from such remarketing."

Palm's Q3 earnings call is on March 19.