Palm says that they sold about 810,000 Palm Pre units. However, that figure may be bogus, according to analyst David Eller. He says that this includes all units sold to resellers, not only activated Pres. This may spell t-r-o-u-b-l-e.
We have been perplexed by a disconnect between PALM's device units sold and our estimates of store level sell through. According to PALM's reported sell through, inventory increased by 13k units and since the ‘vast majority' of both the device units shipped and the device units sold were units of the Pre, there couldn't be an inventory problem. The gap between the two is only 13k. However, since the company recognises revenue on sell in to the channel and the company defines device units sold as units that have been shipped from Sprint (their primary customer) to either customers or second tier distributors, PALM could offer investors a high number of units shipped but still have a glut of inventory in the channel. We believe that channel inventory is currently about 11 weeks, which we believe will pressure reorder rates and make it more difficult to sell high ASP products going forward.
Eleven weeks of inventory in the channel is an staggering number. If true, that may explain the fast price cuts by resellers: First a $US50 discount to $US150 with a rebate, then slashed to $US100 in Amazon, and then the all-mighty Walmart cutting it to a ridiculous $US80.
It will also explain Sprint CEO Dan Hesse's less than enthusiastic comments about the Palm Pre, when he admitted in a Charlie Rose interview that the Pre couldn't play in the same league as the iPhone, "the Michael Jordan" of smartphones.
Eller notes that the investors are not aware of this: "We polled several of the investors who attended the Boston road show lunch and each was under the impression that sell through translated into customer activations. How can this be?
Palm, however, says that their number are clear. Talking to Digital Daily's John Paczkowski, they had this to say:
The sell-through data we post reflects carriers' sales to their customers. For example, Sprint customers include consumers who buy in a Sprint store, and Sprint retail partners such as Best Buy and RadioShack. We rely on our wireless carriers to provide us with sell-through data, and we note this fact in our 10Q.