With Lowered Sales Expectations, Palm Runs Out of Options

When Palm issued a release announcing lowered guidance and sales expectations for this year, Jon Rubinstein didn't even try to cushion it, admitting, "driving broad consumer adoption of Palm products is taking longer than [he] anticipated." OK. Now what? UPDATED

The implication of "longer than expected" is that success will come if everyone just waits long enough. But to say something like that in February of 2010, over seven months after the Pre launch, three after the Pixi launch, and weeks after a by all counts anemic launch for their barely differentiated Verizon counterparts is to tacitly admit that there's a serious problem. If Palm's current lineup doesn't have momentum now, it never will—and their investors know it.

For Palm, this leaves two options: either build a new product—something they may not be able or positioned to do—and hope it's a wild success; or sell out. So who's buying? BusinessInsider throws the regular suspects on the table—RIM, Nokia, Dell, HP—but they seem chosen because they'd be interesting buyers, not because they've shown any real interest. Hey, wouldn't it be neat if Nokia or BlackBerry absorbed webOS, so they could both have truly modern, user-friendly smartphone operating systems? Yeah it would! Someone should tell them.

This leaves Palm with nothing to do but wait: to die; or to be saved by a hero it hasn't even glimpsed yet, and that probably doesn't exist.

UPDATE: Here's Rubinstein's memo to Palm employees re: their lowered guidance for the year. It's far from defeatist, but even further from reassuring:

Team,

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 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. 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. 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.

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. 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.

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. 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. 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.

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.

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.

We'll schedule an all-hands meeting after our earnings announcement in March, and I'll be happy to answer your questions.

Go team!!!

jon

200 brand ambassadors and maybe some local advertising? That's more worrying than if Rubinstein had said nothing at all. [BusinessInsider]