Palm beats reduced estimates

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Palm beats reduced estimates
By Ian Fried
Staff Writer, CNET News.com
June 26, 2001, 1:30 p.m. PT
Handheld maker Palm on Tuesday narrowly topped already slashed estimates for its fiscal fourth quarter but also took more than $435 million in charges after writing off a glut of unsold products.

Palm said its pro forma loss, which excludes the charges, totaled $89.2 million, or 16 cents per share, on revenue of $165.3 million for the quarter ended June 1. Its operating loss of $153.6 million was narrower than the company forecast in its most recent earnings warning.

After twice cutting estimates for the quarter, Palm had been expected to report a pro forma loss of 19 cents per share, according to First Call, on revenue between $140 million and $160 million.
In the same quarter a year ago, Palm had pro forma earnings of $17.2 million, or 3 cents per share, on revenue of more than $350 million.

The company hopes to return to profitability in its second fiscal quarter, CEO Carl Yankowski said in a statement.

As for the charges, Palm took a $268.9 million write-down on components, partially built handhelds and completed devices that it does not expect to be sold. The company said last month that the charge would be in the neighborhood of $300 million.

Palm took a $60.9 million charge for the costs of halting construction on new headquarters and for cutting 500 jobs in two separate rounds this spring, or roughly 25 percent of the company’s work force.

The company also took two charges totaling $106.7 million to account for a drop in the value of the land that was to be used for the headquarters and to account for “reduced expectations” for the Web calendaring business that Palm got with its AnyDay.com acquisition.

Palm’s actual net loss for its fourth quarter was $392.1 million, or 69 cents per share, compared with net income of $12.4 million, or 2 cents per share, for the same quarter last year.

Earlier Tuesday, Yankowski announced a new strategy for selling to large businesses built around partnerships with companies such as PricewaterhouseCoopers.

Palm is trying to reassure critics that it can return to strong growth. The company said it ended the quarter with $513.8 million in cash and that it has obtained a $150 million asset-backed credit line from a group of lenders. Palm said it has not drawn on this line of credit.

Not everyone is convinced that Palm can rebound, however.

“We believe that Palm shares are fully valued at current levels based on the company’s declining growth, negative returns on capital, and significant execution risks,” Robertson Stephens analyst Michael Kim said in a research note Tuesday.

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