Palm Having Supply Problems, Solution Providers Say

Palm

In a recent conference call, Palm executives cited slow sales as the basis for lowering the company's earnings expectation for its fourth fiscal quarter. Solution providers, however, believe the problem also lies in inconsistent supply.

Palm's color 515 handheld has been on back-order, several solution providers told CRN, leaving them unable to fulfill demand from their customers.

One solution provider, who requested anonymity, said at least some of Palm's financial woes must be a result of supply constraints, since the reseller channel has been unable to fulfill orders through their distributors.

Danny Hamady, president and CEO of Momentum Microsystems, a Fremont, Calif.-based solution provider, complained that Palm ships to its volume retail accounts before adequately servicing the reseller channel.

"If we can't support our customers in a timely manner, the customer goes and finds the product online," he said.

Although Palm first told CRN the supply problems were a result of a change in manufacturing plants, a Palm spokeswoman later called to change the story. In a second interview, she confirmed supply constraints across both the reseller and retail channel.

"This kind of thing happens occasionally when you have a hot product," she said. "We have been working to match up supply and demand."

The spokeswoman said Palm is currently shipping to distribution centers.

Elio Levy, senior vice of marketing at Tech Data, Clearwater, Fla., on Wednesday confirmed that the Palm 515 is back-ordered and said he expects to see additional products by the end of the month.

A spokesperson for Ingram Micro, meanwhile, said the channel is demanding more product than Palm can supply.

Questions about whether Palm is able to adequately supply its reseller channel comes at the time when the company is struggling to return to profitability.

Eric Benhamou, Palm's chairman and CEO, said Palm would miss its spring target to meet its break-even expectations.

"Market softness in the handheld industry will prevent us from meeting the expectations we had previous set," he said.

The company said the quarter's earnings would be approximately $230 million, compared with the previously expected $290 million to $300 million.

- Scott Campbell contributed to this story