Weak Tungsten T Sales Hurt Palm’s Bottom Line

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Palm Inc. has just warned investors that the financial results for its most recent quarter will be below expectations.

The company says revenues for the quarter which ended February 28 will be more than 10% below what it predicted in December. This was caused by lower-than-expected demand for Palm’s high-end products, especially the Tungsten T, in the United States. According the Palm, demand was weak partially because corporate I.T. departments are keeping a tight reign on spending during the current economic problems in the U.S.

Demand for the company’s entry-level and mid-range products has been in-line with Palm’s expectations. These are typically sold to individuals, rather than large companies. While consumer purchases of handhelds have slowed, it hasn’t been to the extent that corporate spending has.

Demand in Europe was strong for all Palm’s products.

A few weeks ago, Palm dropped the price of the Tungsten T in an attempt to spur demand, but so far this hasn’t been enough. The company has been making other incentives to customers, too. Recently, the company began offering a free digital camera with the purchase of a Tungsten.

While its true that the weak economy has hurt sales of all types of handhelds, the Tungsten T also faces some intense competition. Late last year several companies introduced New Handhelds with the same general capabilities as Palm’s offering, but for lower prices. This includes the new mid-range Pocket PC models from Hewlett Packard, Dell, and Toshiba.

Recently, sales may also have been hurt by rumors that a new high-end model will be announced soon.

Late last week the company announced a round of layoffs in the Palm Solutions Group, the division of the company responsible for making the Tungsten T.

Other Financial Details

The company expects to record charges between $40 and $45 million related to restructuring. Much of this comes from the severance packages paid to laid off workers.

In addition, the company expects to take a non-cash charge of approximately $100 million to reduce the carrying value of the 39 acres of land it owns in San Jose, Calif., to the current fair market value.

Palm will release the full results of its most recent quarter on March 20.

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