Palm Warns of Possible Loss for Quarter

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In a preliminary earnings report released on Wednesday, Palm Inc. warned that it may post a per-share loss for the quarter which ended August 31 when it makes its final statement on October 1.


The company noted that it expects earnings per share according to GAAP (Generally Accepted Accounting Principles) methods to be between break-even and a $0.01 loss. Palm reported a 15 cent per share profit for the previous quarter, and 25 cents for the June-August quarter one year ago.

Despite a rise in advertising expenses, Palm’s Treo sales declined approximately 8% for the quarter, to an estimated 690,000 from around 750,000 previously. Analysts attributed the drop to competition from the Apple iPhone and Research In Motion’s updated BlackBerry line, as well as sharply rising administrative and R&D costs.

Smartphone sales are estimated to be worth a little over $300 million to Palm for the quarter, out of about $360 million in total revenue.

Palm’s revenue for the March-May quarter was $401 million, and $355 million for the June-August quarter last year.

The average revenue to Palm for a Treo smartphone was $434, compared to approximately $453 for the previous quarter.

Palm announced that it anticipates taking a $10 million dollar charge against earnings due to the cancellation of the Foleo "mobile companion," but did not state in what quarter they would take the charge. The Foleo was cancelled shortly after the end of the June-August quarter.

Analyst: Changes Good, but Not Enough

Deutsche Bank analyst Jonathan Goldberg, in a note to clients, wrote that "While we are encouraged to see Palm finally enter the realm of thin phones [Referring to the release of the Treo500v], we think the new form factors will do little to change their prospects," adding that to remain competitive against Apple and RIM, Palm must implement a new operating system and new services.

Goldberg lists Palm at a "sell" rating.

Management Change

Michael Farese, Palm’s Senior Vice President, Engineering, has quietly left the company. There has been no word on a successor.

Farese has been hired as President and CEO of BitWave Semiconductor.

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