Palm Hopes WebOS Cornerstone Turns Company Cash-Flow Positive in Two Quarters

palm-pre-rockEarlier this afternoon, I listened in on the Palm quarterly conference call. Although the financials were the first order of business, I was more interested in hearing about Palm’s plans for the Pre and WebOS, since that’s paramount to the future of the company. Not that I had many, but I walked away with no doubts that WebOS is now the rock upon which the company is built upon. CEO Jon Rubinstein reiterated this fact:

“We believe we have pioneered the mobile platform for the next 10 years and beyond.”

Adding further to that theme was a question about future Windows Mobile products. Although no future products were detailed by Palm on the call, the company did say it feels the Windows Mobile 6.1 Treo Pro is one of the best WinMo products out there. However, the actual question wasn’t answered. I’m taking that silence as a no, as the business plan revolves around WebOS.

As far as the elusive Mojo SDK for WebOS software development, Rubinstein says that Palm is

“…eager to widen the SDK access, but will do so in a controlled and methodical fashion.”

The original 30 or so developers that were provided early access have apparently offered feedback to Palm, which is what the company wanted. The company is still tweaking the tools and process. When asked about increased availability of the SDK, Rubinstein said that hundreds to thousands of developers would have access in the next few weeks. By the end of summer, Palm intends to have the SDK open to all who want it. “End of summer” can be interpreted several ways, so when asked for clarification, Rubinstein joking answered, “Look it up in Wikipedia on your Pre.” It was kind of amusing, but that pretty much tells me we might not see wide open access until September 21st rolls around.

In terms of the business plan, market opportunity and financials, Palm thinks there is room for three to five players in this space. With Windows Mobile, Symbian, Android, iPhone and BlackBerry already in the mix, I wonder who Palm thinks will be “out”? There’s no question for smartphone demand: Palm says that smartphones account for 19 percent of handhelds in the U.S. and 11 percent globally, with both figures expected to double by 2013. However, the other players have a head-start and “newcomers” like Intel   have smartphone designs too.

In any case, Palm has some money to burn while we see if the business plans come to pass. Cash, cash equivalents and short-term, liquid investments equaled $255.1 million at the end of the May quarter. That total includes $103.5 million from the recent equity offering. For the quarter, Palm used $72.4 million and feels that they’ll be cash-flow positive in the second quarter of fiscal 2010; just two quarters from now. That could well happen, but the signs to watch are handset sales of the Pre and growth of the application store. Of course, there won’t be much growth there until Palm opens up that SDK and takes the App Catalog out of preview beta. You can view the rest of the financials in this PDF.

Palm could always license the WebOS, but said on the call that they’re not thinking about it at this time. I was hoping to ask about the potential of WebOS on a netbook, but there were too many questions ahead of me in the queue. Palm did say that going forward, they would not be focusing on handhelds, but instead would be concentrating on smartphones. That doesn’t preclude the possibility of other WebOS devices in the future, but the current target market is the smartphone area.

Folks hoping to hear more about the Pre on other carriers or in a GSM version will have to wait. No questions on these topics were fielded, although Palm did remind us that Bell Mobility of Canada will be the next market for the Pre.

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