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To Calm Anxious Employees, Palm CEO Blames Verizon

The news coming out of Palm (PALM) yesterday was not good: revised guidance saying that "2010 revenues to be well below its previously forecast range of $1.6 billion to $1.8 billion."

That type of news doesn't only make investors nervous -- it also freaks out employees. So, as the Wall Street Journal reported, Palm CEO Jon Rubinstein sent an internal memo to calm his people. In the process, he essentially blamed poor sales on Verizon Wireless -- a strategy which is not likely to endear the needy company to one of its biggest partners:

[Senior vice-president of global 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.
It sounds like too little, too late. When it comes to equipment, I suspect that Verizon has the mindset of a retailer. It wants products that customers demand, and it doesn't expect to create the market for a hardware vendor.

Palm's woes are longstanding and hardly the fault of Verizon. Look at this competitive snapshot from Google Finance, with numbers from the companies' most recent quarters:

Palm is losing big money, with performance that is outstandingly bad. Blaming Verizon internally is likely to anger the carrier -- particularly now that the memo has become public.

Why didn't Palm generate the demand for its products? Because it can't. Compared to the iPhone or Android products, Palms phones just aren't compelling enough.

Palm may have run out of time to set things right. As UBS says, "[W]e believe there is now a greater sense of urgency to drive volumes to achieve profitability given its cash burn and cash balance." No kidding. The $500 million Palm expects to have in the bank at the end of the quarter isn't going to last very long at its current spending rate, plus it needs to advertise products.

I'd be surprised if we don't hear about major layoffs at the company come the March earnings announcement. It may be time to switch Palm's logo from orange to red, and make it into a panic button.

Image: Photo composite via Trance Mist

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