Palm Centro goes GSM at AT&T

One popular handset does not a successful vendor make.
But in Palm Inc.’s case, the launch of its popular, $100 Centro smartphone at AT&T Mobility in a GSM, quad-band world format, may help the company recapture mindshare and produce cash flow.
The Centro first surfaced at Sprint Nextel Corp. in late 2007 with limited exclusivity, now ended. At Sprint Nextel the Centro sold well, according to Palm. But component shortage issues constrained the device maker’s ability to deliver adequate supplies, a situation presumably overcome with the launch of a GSM version at market-leading AT&T Mobility.
The quad-band GSM format also allows Palm to take its inexpensive smartphone to carriers outside the United States, an effort undoubtedly already underway.
Having a popular handset on the market is especially critical to Palm as it retools its essential device platform to stop its descent in market share — mostly snapped up by Research In Motion Ltd. over the past few years — and reposition the company for the future.
In financial terms, Palm last year raised $350 million in new financing with private equity, increased debt and attacked its cost structure to lower its breakeven point. The Centro’s brisk sales have contributed to a drop in Palm’s margins, from about 36% to 30%, according to Dow Jones, but CEO Ed Colligan said last week at the Mobile World Congress in Barcelona that the Centro is bringing in new customers upgrading from feature phones and that was worth the margin decrease.
Technically, the company is working on a Linux-based OS and a product platform to take it forward.
The company’s fiscal third quarter ends this month and analysts will certainly scrutinize Palm’s numbers when they’re delivered in mid-March to see if the company’s efforts are bearing fruit.
Tavis McCourt, analyst at Morgan Keegan, has said that if Palm succeeds in lowering its cost structure, delivers a “half decent” new platform to refresh the aging Treo line and comes up with a hit — three challenging caveats — the company has time to reposition itself. In late January the company announced it would shutter its branded retail outlets across the country.
“We may look back on the (fourth calendar) quarter and see that $100 smartphones made these devices a mass-market item,” McCourt said at year’s end after a Palm conference call.