Palm Inc yesterday announced stronger-than-expected quarterly financials and guidance, as more people bought its Treo smartphones. The company now hopes to sell more Treos to enterprises and to make a dent in the European market.
The Sunnyvale, California-based company’s profit rose 36% to $29.9m, or 28 cents a share, for its most recent quarter ended March 3, from $4.4m, or 4 cents, a year ago.
Revenue grew 36% to $388.5m from $285.3m last year.
Before items, Palm would have posted a 19-cent profit – above analysts’ average 17-cent forecast. Wall Street also had been hoping for just $377m in revenues.
The good news sent Palm shares up nearly 6% to $21.28 in after-hours trading on the Nasdaq yesterday.
Sales of Palm’s newer Treo smartphones during the quarter continued to outpace its other handheld products. Smartphone revenue reached $288.5m during the quarter, while handhelds pulled in just $100m.
Our focus is on smartphones, said chief executive Ed Colligan on a conference call. Palm is now reaping the rewards from its decision to support multiple open platforms and offer a choice of smartphones based on either Windows Mobile or Palm OS, Colligan said.
Treo shipments reached 564,000 in the quarter, more than double the volume a year ago. Treo’s drove 74% of total revenue for the quarter, up from 46% a year ago, Colligan said.
Palm said its share of the US smartphone market rose to 30% from 22% last year.
But the US is most of Palm’s business, driving 80% of total revenue. Europe is our next major target region, Colligan said. We will launch more products this year tuned to global demand.
Chief financial officer Andy Crown told analysts to expect growth to accelerate in Europe in second half of the calendar year.
Recently, the company opened a Europe-based design facility.
In total, Colligan said Palm would introduce three additional new smartphones this year, following the January launch of its Treo 700W, which boasts the Microsoft Windows operating system.
Colligan declined to give details on upcoming products, but said some would boast new radio technologies, such as EV-DO, while others would have new operating system and hardware configurations.
This strategy expands our addressable market to more users and at a wider range of price points, he said.
Palm also has doubled its efforts to sell more Treos to enterprises in the US and Europe, Colligan said.
We’re going to a lot of effort to get more enterprise business, Colligan said. We’ve significantly increased our direct selling effort by increasing the [sales] team, he said. We will continue to expand our footprint in the enterprise.
A major part of its enterprise strategy is to partner with mobile software makers and carriers, namely Microsoft, GoodLink and Verizon, Colligan said.
While the Wall Street Journal today ran an article on how Palm strategically sought to capitalize on the legal woes of chief rival Research in Motion Ltd, Colligan said RIM was not a key factor in Palm’s recent strong quarter.
Of course, RIM’s BlackBerry PDA faced a potential US shutdown recently for alleged patent infringement. The company settled with patent house NTP Inc for $612.5m earlier this month.
The RIM-NTP settlement was good for the industry, Colligan said. We expected that to happen. We think our solutions stand up well. Much of the growth you see in our business is really related to our solutions . . . and less related to whatever’s happening at RIM.
Colligan’s goal is not necessarily to replace the BlackBerry in the enterprise setting, but rather sell along side it, through Palm’s BlackBerry Connect package.
Palm also faces new competitive threats as Motorola and Nokia continue to wade into the smartphone market. I believe this category is really poised for quite a bit of growth and large companies like Motorola and Nokia coming into the category and legitimizing the products…I believe will benefit us, Colligan said.
While the large company’s product may attract new users to smartphone devices, they’re going to walk out of the store with a Treo, according to Colligan.
Looking ahead, Palm expects to rake in $400m to $405m in revenues on a 22-cent to 23-cent profit. Analysts had forecast $395.7m in revenue and a 21-cent profit.
