Will lousy brand awareness be Palm’s Waterloo? With weaker than expected launches of the Pre and Pixi at new carrier partner Verizon, it’s beginning to look like it.

Certainly, Palm’s leadership appears to believe that insufficient carrier support is largely to blame for its current woes. In an all-hands memo to employees yesterday (full text below), Palm CEO Jon Rubinstein said the company is taking some extraordinary measures to address unexpectedly weak sales for its handset lineup. To drive demand at Verizon and raise its customers’ apparently limited awareness of webOS, Palm (PALM) has initiated Project JumpStart, a sort of product evangelism outreach program.

“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 (VZ) 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.”

A wise move, particularly given reports that Verizon sales reps unfamiliar with Palm’s smartphones often opt to pitch more familiar devices like Motorola’s (MOT) Droid and RIM’s Blackberry to new customers. Additional in-store training should help drive sales volume, assuming Palm’s offerings are compelling and differentiated enough to withstand comparison with rival devices.

The question, of course: Are they? And while initial reviews of the Pre and webOS operating system suggested they were, it’s hard not to look at Palm’s current situation and conclude that they really might not be–particularly with new and impressive Android and Windows Phone 7 devices headed to market and Apple (AAPL) and Research in Motion (RIMM) both presumably working on refreshes of their iconic devices.

“Given the sizable discounts now prevalent on the Pixi, it now suggests that the real problems for the Pixi and the Pre go beyond insufficient carrier support and unfocused TV advertising campaigns,” CL King analyst Lawrence Harris observed in a research note to clients this morning. “Rather, consumers are not finding the Pixi a compelling product in an increasingly competitive smartphone market.”

If that’s truly the case, these Palm Brand Ambassadors the company is sending to Verizon (VZ) have their work cut out for them, at least at the moment. Sources close to Palm tell me the company plans to introduce at least one new smartphone this year. Perhaps that will be the device that drives demand and pushes the company back to profitability.

Team,

This morning we announced preliminary results for our 2010 third quarter. Since the quarter has not yet closed, it is too soon to offer exact numbers, but we stated that we expect to report revenues for Q3 between $300 and $320 million. We also announced that we expect our revenue for this fiscal year to fall below the guidance we gave to Wall Street, which ranged from $1.6 to $1.8 billion. As we mentioned in our press release, our softer than expected performance is due to slower than expected customer adoption of our products, which in turn has prompted our U.S. carrier partners to put additional orders on hold for the time being. On a positive note, we expect to exit the quarter with over $500 million in cash on our balance sheet. We’re scheduled to announce our full financial results in March.

I realize this news is difficult to swallow. We made this announcement today to prevent a surprise for Wall Street when we announce quarterly earnings in March. In the meantime, the entire executive team has been working extremely hard to improve product performance, and have implemented a number of initiatives to increase awareness and drive 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.

All of these efforts are examples of how we are working to accelerate adoption and grow distribution of webOS. In the next few weeks, your management will work with you to make sure your priorities are laser-focused, primarily on helping to increase sales, improve product quality and differentiate the Palm product experience.

Our goals are taking longer than expected to achieve, but I am still confident that our talented team has what it takes to get the job done.

We’ll schedule an all-hands meeting after our earnings announcement in March, and I’ll be happy to answer your questions.

Go team!!!

jon

Palm (PALM) expects third-quarter revenue to be between $285 million and $310 million–significantly less than the $425.4 million analysts had been expecting. As a result, revenue for the fiscal year will be “well below” the $1.6 billion to $1.8 billion the company had projected.

Damn. Puts a new spin on that Chinese New Year smartphone production respite we heard about earlier this month, doesn’t it?

Clearly, concerns about declining sales of the company’s webOS smartphones were well-founded. It now seems there’s a growing possibility they may not reach critical mass. Which is obviously worrisome because Palm has essentially bet the farm on them.

“Palm webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today, and our work to evolve the platform and bring industry-leading technology to market continues. However, driving broad consumer adoption of Palm products is taking longer than we anticipated,” Palm CEO Jon Rubinstein said in a statement. “Our carrier partners remain committed, and we are working closely with them to increase awareness and drive sales of our differentiated Palm products.”

Rubinstein’s reassurances have done little to temper investor disgust over the company’s news. At $6.68, Palm shares are down more than 17 percent as I write this.

Perhaps it’s time for Palm to start looking for a buyer, whether Nokia (NOK), Dell (DELL) or someone else. Not that these companies are interested. For Palm to be a good acquisition target, it needs to demonstrate viability, something it’s obviously having trouble doing.

Below, Palm’s press release detailing today’s ugly news.

Palm, Inc. (NASDAQ:PALM) today indicated that it expects that revenues for the third quarter of fiscal year 2010 will be in the range of $285 million to $310 million on a GAAP basis and in the range of $300 million to $320 million on a non-GAAP basis. Revenues for the quarter and full year are being impacted by slower than expected consumer adoption of the company’s products that has resulted in lower than expected order volumes from carriers and the deferral of orders to future periods. Accordingly, Palm expects fiscal year 2010 revenues to be well below its previously forecasted range of $1.6 billion to $1.8 billion. The company will provide more detail on its financial results during Palm’s third-quarter financial results conference call currently scheduled for Thursday, March 18.

“Palm webOS is recognized as a groundbreaking platform that enables one of the best smartphone experiences available today, and our work to evolve the platform and bring industry-leading technology to market continues. However, driving broad consumer adoption of Palm products is taking longer than we anticipated,” said Jon Rubinstein, chairman and chief executive officer. “Our carrier partners remain committed, and we are working closely with them to increase awareness and drive sales of our differentiated Palm products.”

The Company expects to close its third fiscal quarter with a cash, cash equivalents and short-term investments balance in excess of $500 million.

It’s important to remember this whenever you see stories about Hollywood’s resurgence, measured by box office receipts. Because box office receipts don’t do that much for Hollywood’s bottom line–that’s the role of DVDs.

It’s also important to remember this when you see stories about Hollywood’s conniption fit over “windowing” and the lawsuit/hardball deal combo the studios have used with Redbox and Netflix (NFLX). Because the studios’ desire to wring every last penny from DVDs is what’s driving those moves.

Ditto for Hollywood’s desire for a 3-D boom: The studios are in desperate need of a new revenue stream to replace the disappearing discs.

So here’s the one-sentence story I promised, which illustrates the collapse. It comes via Edward Jay Epstein’s dissection of MGM’s blowup, published on Defamer (nice get!):

In the US alone, MGM’s net receipts from DVDs fell from $140 million in its 2007 fiscal year (which ended March 31, 2008) to just $30.4 million by 2010.

That clarifies things, no?

Yes, you can add plenty of caveats if you’d like. For instance, MGM has been more or less dormant except for its Bond films the last couple years, and studios rely on new releases to juice DVD sales. And the DVD slump hasn’t hit all studios equally–Disney (DIS) and DreamWorks Animation (DWA) have done less poorly, because parents still need to buy stuff to occupy their kids.

But that’s still a staggering 78 percent drop in a couple years. So even if you’re running a studio whose DVD sales don’t look that bad, you’re looking at plummeting sales. Scary stuff.

“Sun Microsystems’ financial position has become more precarious and the commission’s inquiry has continued,” the letter states. “Some have raised concerns over the company’s ability to continue to employ its thousands of workers. Accordingly, we respectfully request the European Commission complete its investigation of this transaction as quickly as possible.”

An earnest (and surprising) appeal. But it’s hard to see it going over well with the EC, which issued a formal objection to the deal Nov. 9 and has been carping about Oracle’s (ORCL) lack of cooperation in its investigation for months now.

Meanwhile, Sun (JAVA), which reported a net loss of $2.2 billion for its 2009 fiscal year, compared with a net loss of $403 million for 2008, continues to lose about $100 million per month as it waits for the deal to close.

Below, the senators’ letter in full:

Chargé d’Affaires Angelos Pangratis 
Acting Head of Delegation
Delegation of the European Commission to the United States
2300 M Street, NW
Washington, DC 20037
 
Dear Chargé d’Affaires Pangratis:
 
As fellow government officials committed to the principle that competition is the cornerstone of healthy economic growth, we would like to take this opportunity to share our thoughts with you as to the proposed acquisition of Sun Microsystems, Inc. by Oracle Corporation. In addition, due to Sun Microsystems’ deteriorating financial condition and the possible negative effect on employment of the company’s workforce, we respectfully request the European Commission expedite the completion of its investigation into this transaction. 
 
The United States Department of Justice, after an intensive investigation, closed its inquiry into this transaction without taking any action. In fact, the Justice Department did not find documentary evidence that this acquisition would harm competition. We recognize that the European Commission has a sovereign right to thoroughly investigate transactions where corporations utilize the European Union’s marketplace. Further, it is our understanding the Commission is concerned about competition in the database software market.  However, we have been informed by Sun Microsystems that their subsidiary, which competes in this specific market, generates only €17 million in revenue and that the same market has competitors with capitalizations of tens of billions of Euros. 
 
Unfortunately, Sun Microsystems’ financial position has become more precarious and the Commission’s inquiry has continued. Some have raised concerns over the company’s ability to continue to employ its thousands of workers. Accordingly, we respectfully request the European Commission complete its investigation of this transaction as quickly as possible.   
 
Thank you for your attention to this matter.

Excluding charges related to stock options and other items, Palm (PALM) said net losses were $13.6 million, or 10 cents a share, for the recent period. Revenue slipped to $68 million from $366.9 million in the same period last year. Excluding revenue deferred from sales of the company’s new Pre handset, Palm said adjusted revenue would have been $360.7 million. Analysts had expected the company to turn in a loss of 24 cents a share on sales of $291 million.

Palm shipped a total of 823,000 smart phone units during the quarter, up 134 percent over the fourth quarter of fiscal year 2009, but down 30 percent year over year. Smart phone sell-through for the quarter was 810,000 units, up 76 percent from the fourth quarter of fiscal year 2009 and down 21 percent year over year.

Speaking to analysts Thursday afternoon, Palm execs claimed that “the vast majority of new sales” for the quarter were generated by the Pre. But they declined to separate Pre sales from those of other handsets.

Skeptics will no doubt look at this and conclude that Palm didn’t meet expectations for Pre shipments of about 520,000. That, or the company is still selling a hell of a lot of Centros.

“We’re making significant progress with Palm’s transformation, and our culture of innovation is stronger than ever,” said Jon Rubinstein, chairman and chief executive officer. “We’re launching more great Palm webOS products with more carriers, and turning our sights toward growth.”

A few more Jon Rubinstein remarks from the earnings call:

On additional form factors:

I’m a big believer in families of products, and we’ll continue to evolve the line in the future and have a family of products for webOS.

On Carrier Customization:

We don’t really talk about our carrier agreements.

On Pre sales:

Sell-in and sell-through…the vast majority of new sales…relate to the Pre.

On the Pixi cannibalizing Pre sales:

The Pixi is a more cost-effective offering, so yes we expect some people might come into the store looking to buy a Pre and end up with a Pixi. But others might come in looking for a Pixi and end up with a Pre. As I said, we’re big believers in families of products. We’re happy to have two webOS products on the market.

On carrier diversification:

Sprint did a phenomenal launch with the Pre. They invested heavily in advertising….We’re looking forward to launching the Pixi with them as well. We don’t talk about our roadmap, but we’ll have more carriers and more products in the future.

On Motorola’s new Motoblur service:

We don’t really know much about it. To build really great consumer products, you have to own the OS and services. And the fact that we have webOS as our asset is really important.

Looks like News Corp. was a little too optimistic when the company told investors in May that it expected a decline of around 30 percent in fiscal-year-adjusted operating income.

Reporting earnings this afternoon, the publisher of The Wall Street Journal and this Web site instead posted a decline of 32.5 percent.

And, to think, News Corp. lowered that forecast twice last fall.

Anyway, the company lost $203 million, or eight cents a share, in its fiscal fourth quarter. Revenue fell 10.5 percent to $7.67 billion, dragged down by a decrease in ad revenue and $403 million in impairment charges and $228 million in restructuring costs, both largely attributable to, ahem, “red-hot social networking site” MySpace.

For the quarter, News Corp. swung from $1.1 billion in net income a year ago to a net loss of $203 million. Gruesome. Excluding items, however, it earned 19 cents a share, which beat consensus estimates by a penny. So there’s that.

“I think the worst may be behind us,” News Corp. Chief Rupert Murdoch said during a conference call with analysts. “But there are no clear signs yet of a fast economic recovery.”

Which is pretty much what he said last quarter as well. “I am not an economist…but it is increasingly clear that the worst is over,” Murdoch said back in May. “As you know, I have been uncharacteristically pessimistic in recent calls, though I would argue that it was a well-founded concern. But there are emerging signs in some of our businesses that the days of precipitous decline are done and that revenues are beginning to look healthier.”

Looks like News Corp. was a little too optimistic when the company told investors in May that it expected a decline of around 30 percent in fiscal-year-adjusted operating income.

Reporting earnings this afternoon, the publisher of The Wall Street Journal and this Web site instead posted a decline of 32.5 percent.

And, to think, News Corp. lowered that forecast twice last fall.

Anyway, the company lost $203 million, or eight cents a share, in its fiscal fourth quarter. Revenue fell 10.5 percent to $7.67 billion, dragged down by a decrease in ad revenue and $403 million in impairment charges and $228 million in restructuring costs, both largely attributable to, ahem, “red-hot social networking site” MySpace.

For the quarter, News Corp. swung from $1.1 billion in net income a year ago to a net loss of $203 million. Gruesome. Excluding items, however, it earned 19 cents a share, which beat consensus estimates by a penny. So there’s that.

“I think the worst may be behind us,” News Corp. Chief Rupert Murdoch said during a conference call with analysts. “But there are no clear signs yet of a fast economic recovery.”

Which is pretty much what he said last quarter as well. “I am not an economist…but it is increasingly clear that the worst is over,” Murdoch said back in May. “As you know, I have been uncharacteristically pessimistic in recent calls, though I would argue that it was a well-founded concern. But there are emerging signs in some of our businesses that the days of precipitous decline are done and that revenues are beginning to look healthier.”

Good thing Wall Street wasn’t expecting much from Microsoft. Because it didn’t get it.

After market close Thursday, the Redmond, Wash.-based tech giant reported that fiscal fourth-quarter net income fell to $3.05 billion, or 34 cents a share, from $4.3 billion, or 46 cents a share, in the same period a year earlier.

Revenue for the period ended in June fell 17 percent to $13.1 billion. Wall Street had been looking for earnings of 36 cents a share on $14.37 billion in revenue, according to data compiled by Thomson Reuters.

Online advertising revenue decreased $86 million, or 14 percent, to $529 million, primarily reflecting a decline in display advertising.

The company missed estimates by $1 billion. Gruesome.

“Our business continued to be negatively impacted by weakness in the global PC and server markets,” CFO Chris Liddell said in a statement. “In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter.”

Microsoft shares are trading down more than eight percent at $23.50, as I write this.

Below is the full earnings release. BoomTown’s Kara Swisher will be liveblogging the earnings call later this afternoon.

Microsoft Reports Fourth-Quarter Results

The company delivered operational efficiency and innovation in a difficult environment

REDMOND, Wash., July 23, 2009–Microsoft Corp. today announced revenue of $13.10 billion for the fourth quarter ended June 30, 2009, a 17% decline from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $3.99 billion, $3.05 billion and $0.34 per share, which represented declines of 30%, 29% and 26%, respectively, when compared with the prior year period.

“Our business continued to be negatively impacted by weakness in the global PC and server markets,” said Chris Liddell, chief financial officer at Microsoft. “In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter.”

The financial results for the fourth quarter ended June 30, 2009, included the deferral of $276 million of revenue related to the Windows 7 Upgrade Option program that was announced on June 25, 2009. This revenue deferral reduced earnings per share by $0.02.

The fourth-quarter financial results also included $193 million of legal charges, $108 million of impairments to investments and $40 million of additional severance charges related to the previously announced plan. Operating expenses were reduced by $105 million of capitalized research and development expenses due to the technical milestones reached for Windows 7. Combined, these items also reduced earnings per share by $0.02.

Significant product milestones were achieved in the quarter including the releases of Windows 7 release candidate, Windows Server 2008 R2 release candidate, as well as Bing, Microsoft’s search engine designed to help people make faster, more informed decisions.

For the fiscal year ended June 30, 2009, Microsoft reported revenue of $58.44 billion, a 3% decline from the prior year. Operating income, net income and diluted earnings per share for the year were $20.36 billion, $14.57 billion and $1.62, which represented declines of 9%, 18% and 13% respectively.

“While economic conditions presented challenges this year, we maintained our focus on delivering customer satisfaction and providing solutions to our customers to save money,” said Kevin Turner, chief operating officer at Microsoft. “I am very excited by the wave of product and services innovations being delivered in this next fiscal year.”

Business Outlook

Microsoft is providing operating expense guidance of $26.6 billion to $26.9 billion, for the full year ending June 30, 2010.

Management will discuss fourth-quarter results and the company’s business outlook on a conference call and webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today.

“If we were any more successful, we’d be bankrupt.”

– Sony CEO Howard Stringer on the company’s LCD business, May 28, 2008

About the best thing to be said for Sony’s grotesque financial results is that they came in smaller than expected. The company’s 98.9 billion yen ($1 billion) loss for the fiscal year ended March–its first net loss in 14 years–wasn’t nearly as bad as the 150.0 billion yen ($1.57 billion) figure it had predicted in January or even close to the 173.8 billion yen ($1.8 billion) analysts polled by Thomson Reuters had been forecasting. And the same is true for Sony’s fourth quarter, as well. The net loss of 165.1 billion yen ($1.7 billion) it reported was far better than the 228.7 billion yen ($2.39 billion) forecast.

Still ugly as hell, though. And according to the company’s leadership, its next fiscal year will be little different. Sony is forecasting a loss of 120 billion yen ($1.2 billion). Given that unfortunate outlook, Sony (SNE) is closing three factories in Japan, part of an ongoing effort to shore up a business ravaged by the worst recession in decades. But cost-cutting measures like that can only do so much.

As analysts note, what Sony really needs is a killer product. It is no longer the force it once was in consumer electronics, having ceded its dominance in portable music players to Apple (AAPL) and its leads in the television and videogame console markets to Samsung Electronics and Nintendo. “Their outlook gave me the impression that their business is heading for a gradual recovery,” Fujio Ando, senior managing director at Chibagin Asset Management, told Reuters. “But it would all depend on whether they would be able to start producing popular products, because right now they have no ‘Number One’ products. I see Sony’s branding power weakening.”

And that’s something of which Sony is painfully aware.

“We have two distinct challenges facing us,” Sony CEO Howard Stringer recently told the New York Times. “The first is the global slowdown, which forces us to make significant adjustments. The second challenge is the evolution of our competitive environment. New competitors [are] springing out everywhere.”

Indeed. And while Sony seems to be meeting the first challenge, albeit slowly, it hasn’t yet begun to make headway toward meeting the second. And at this point, one wonders if the company is even capable anymore. As Japanese Economy, Trade and Industry Minister and former Sony employee Akira Amari asked back in October 2006, “What has become of the Sony known for its technology?”

It would appear that Intel’s loss is, for the most part, AMD’s gain. Intel’s (INTC) shipments declined 16 percent while those of its rival increased 13 percent. Great news for AMD (AMD), which has been having a rough time of it lately with more than two fiscal years of losses and little sign of an upturn.

And what of the broader chip market? IDC says it remains weak, but believes a bottom may be in sight. Overall, shipments were down, but their rate of decline appears to be slowing. During the first quarter, world-wide shipments fell 10.9 percent from the fourth quarter of 2008. That’s not nearly as bad as their 17 percent decline from the third quarter to fourth. So the good news here in that the bad news could have been worse. Says IDC: “The PC processor market is still in weak condition. While OEM demand picked up notably towards the end of the quarter and going into April, IDC is wary that the demand was due to OEMs replenishing their inventories rather than reflecting a return of solid end demand and return to market normalcy. IDC continues to expect modest sequential processor unit shipment decline in 2Q09.”