Palm Inc. has just released the results of its most recent financial quarter, which ended February 28. Earlier this month the company warned investors to expect a poor quarter because of weak revenues and this prediction definitely came true. Palm has revenues of $209.0 million for the quarter, which is down 28.6% from the same quarter a year ago.
This lead to a pro forma net loss of $26.5 million, or 91 cents per share. This was almost twice as bad as the same quarter last year, when Palm had a pro forma net loss of $14.0 million, or 49 cents per share.
The company’s actual loss was significantly higher because it includes restructuring charges of $40.2 million to pay severance for laid off workers and a non-cash charge of $102.5 million to reduce the carrying value of the 39 acres of land it owns in San Jose, Calif., to the current fair market value.
Earlier this month, the company blamed the reduced revenues on lower-than-expected demand for Palm’s high-end products, especially the Tungsten T, in the United States. In response, the company dropped the price of this device by $100. This appears to have had the desired effect, as the company reported that worldwide sales of the Tungsten T increased 75% in February compared with the previous month. Though its profit margin is down, sales of the Tungsten T have increased to the point where it is contributing more to the company’s bottom line than it did at the higher price.
There was some other good news, too. The company’s gross margins are up slightly to 31.3% and its operating expenses are down almost 20% to $86.5 million. It has also cut its inventory in half. It finished up the quarter with $259 million in cash.
However, the company’s forcast for the current quarter isn’t rosy. It expects revenue to be between $185 million to $200 million, down about 15% from the same quarter in 2002.
Another bright spot is that PalmSource reported its first ever profitable quarter. It had revenues of $26 million during the quarter, leading to a profit of $1.4 million. Revenues were up over 25% compared with the same quarter last year.
PalmSource is still a subsidiary of Palm but is expected to be split off in the next few months. PalmSource’s profitability is an important step in this process.
However, company execs said in a conference call this afternoon that the spin-off won’t happen until sometime this summer.