Palm reaches all-time high in sales, painfully low profits

Centro manufacturer Palm Inc. announced that despite record high sales, its fourth quarter revenue was well below forecasts, reporting losses of $43.4 million.

The Centro is proving to be the flagship device for Palm, that is to say, it's been just enough to buoy the company through flagging Treo sales until the 800w ships.

2008's fourth quarter sales for the Palm Centro were a record high 968,000 units, a 15% increase over last quarter. Centro sales are actually exceeding expectations for the company, but are providing too low a margin to offset the losses in Treo sales.

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All year, the company has been putting emphasis on the first quarter of 2009 as the turning point where Palm will begin the return to profitability. In the Q&A following Palm's earnings statement yesterday, CEO Ed Colligan said, "We need to get the Windows Mobile products into our product line. As I said in my comments, those are coming very soon. We will rebuild that line during this next few months and we expect those to contribute to improved gross margins and improved revenue growth."

He went on to say, "Right now, it's really just heads down, execute as best we can, deliver the platform in a way that is really compelling and get that out as soon as we possibly can. We are obviously anxious to see that come to market."

Earlier in the year, IDC research showed the Centro had given Palm 13.4% of the smartphone market, with a majority of users being first-time smartphone buyers. By the third quarter of the year, shipments of Palm devices reached 826,000, an increase of 13%, but revenues were down nearly $29.2 million.

Colligan at that time said the Centro was helping the company grow to new customers and "help [Palm} to some extent offset the declines in some of our older aging product lines, including Windows Mobile and older Treos."

The Centro's newly increased availability through Verizon may just keep the company afloat long enough to meet the release of the Treo 800w, but after that, it's sink or swim.

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