Palm Washes Hands of WinMo as Losses Mount

It’s back to the future for Palm, which is dropping Microsoft’s Windows Mobile in favor of its own proprietary platform, webOS, unveiled earlier this year.

Palm CEO John Rubinstein reportedly told investors in a conference call on Thursday that the company wants to dedicate all of its future development resources to WebOS evolution.

Palm did not respond to the E-Commerce Times’ request for comment by this article’s deadline.

Palm has already sunk significant resources in webOS, which it introduced at the beginning of the year. Most significantly, it has released a software development kit and created a webOS development forum.

Another sign of Palm’s commitment to webOS: it’s recently unveiled Pixi smartphone will be offered on the platform. The Pixi is an important addition for Palm, which has been struggling to steady its financial ship primarily through sales of the Pre, which it launched in the U.S. in June.

Quarterly Losses

Palm reported a loss of US$161.1 million for its first quarter of fiscal year 2010, which ended Aug. 28, 2009 — a quadruple decline from the same period last year, when it registered a $39.5 million loss.

It did not break out sales figures but said it shipped 823,000 smartphones in the quarter, with the “vast majority” Pre devices. Analyst estimates suggest that Palm shipped about 500,000 Pre units.

Palm’s revenue projections for the next quarter were less than analysts had expected.

The weaker forecast was in part due to lower anticipated demand for legacy products, the company said. Palm expects non-GAAP adjusted revenues to be between $240 million and $270 million, compared with the $344 million to $347 million expected by analysts.

The second half of the fiscal year, though, is expected to yield stronger operating performance, according to the guidance offered by Palm: Non-GAAP adjusted revenues for fiscal year 2010 are projected to be $1.6 billion to $1.8 billion.

Banking on webOS

All of these factors explain in part why the company is going back to its previous model of making devices for its own OS, said Greg Sterling of Sterling Market Intelligence.

“Their own OS is very strong, and there is no reason to continue to use Windows Mobile unless it is giving them a sales advantage — which it isn’t — or allowing them to diversify their offerings,” he told the E-Commerce Times.

Palm will also save on the licensing fees, Sterling added.

The decision may say as much about the Microsoft platform as it does about Palm’s strategic decision making.

“Microsoft has a challenge with Windows Mobile,” observed Sterling. “It needs to create a consumer identity in the marketplace for the platform. So far, Windows Mobile has been subordinate to what the carrier does.”

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