Palm Kills WinMo as Pre Loses Momentum

Like a desperate gambler down to his last few chips, Palm is ditching Windows Mobile and going all in with its own webOS. But the company will have to find a way to boost sales of its Pre and the upcoming Pixi if it hopes to stay in the smartphone gpalm-preame.

The move to end the five-year relationship with Microsoft’s mobile operating system was as predictable as it is logical. Windows Mobile continues to lose market share to consumer-targeted platforms such as the iPhone and RIM’s BlackBerry, which has deftly expanded beyond the enterprise. And while the dusty WinMo platform is direly in need of a makeover, webOS has drawn generally positive reviews as a worthy competitor in the smartphone space.

Palm failed to disclose exact figures but said the Pre — which launched on Sprint’s network June 6 — accounted for the “vast majority” of the 823,000 units it shipped during the quarter, presumably placing Pre sales in line with analysts’ forecasts of roughly 500,000 units. As expected, Palm received a bit of a bump from the Pre: while quarterly shipments were down 30 percent from the year-ago period, they more than doubled from the prior quarter.

The Pre’s momentum seems to be dissipating already, however. Palm said it expected revenue for the current quarter to come in between $240 million and $270 million, well short of Wall Street’s expectation of $344 million. The company’s quarterly loss can be partially attributed to the fact that Palm defers much of the revenue from Pre sales, but Palm also announced plans to sell 16 million shares of common stock to shore up its $200 million-plus in cash reserves — an indication that it plans to eat through more of its bankroll in the near future.

Palm should get another boost from the Pixi, an affordable webOS-enabled device aimed at younger users that will launch with Sprint in time for the holidays, and there’s a chance that Verizon Wireless will play the role of Palm’s redeemer with its expected launch of the Pre early next year. But Apple and RIM continue to gain momentum, and a slew of Android handsets are coming to market in the next year. If Verizon — or another heavy-hitting carrier — can’t come to the rescue in the next several months, Palm’s investment in webOS won’t do much to reverse its fortunes.

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