Palm Quarterly Loss At $258 Million

For the three months ended Aug. 30, Palm said it lost $258.7 million, or 45 cents per share. In the year-ago period, the Milpitas, Calif.-based company lost $32.4 million, or 6 cents per share.

If not for separation and restructuring expenses, Palm said it would have lost 6 cents per share, less than the loss of 8 cents per share expected by analysts surveyed by Thomson First Call.

Palm reported revenues of $172.3 million for the first quarter, down 20 percent from revenue of $214.3 million in the same period of 2001. Analysts predicted Palm revenues of $178 million, according to First Call.

"Our first-quarter results continue to demonstrate the high standards of operational discipline maintained by Palm employees and demanded by the current market environment," said Palm Chief Executive Eric Benhamou.

Palm also announced the creation of two new sub-brands for its future lines of handheld computers, which will be tailored to professional and casual consumers.

The first product, from the Tungsten line, is a mobile system for corporate and information technology managers, Palm said. The Tungsten system would allow workers to use their Palm PDAs to access the Internet wirelessly, then log on to corporate e-mail accounts and other work-related environments behind company firewalls.

Palm's other new line, from the Zire product family, is geared toward casual PDA users.

"What a student or a suburban supermom wants from a handheld is fundamentally different from what an IT manager or a road warrior expects," said Todd Bradley, president and chief executive officer of Palm Solutions Group.

"On the branding side they seem to have put a good deal of thought into the announcements and we applaud their approach into the market," said Paul Coster, an analyst with J.P. Morgan. But Coster questioned the strength of Palm's Tungsten line as a solid workplace solution.

"They need to demonstrate that it's got the real-time ability to multitask and until it's proven, I think it's going to be a bit of a stretch for the enterprise," Coster said.

Some observers in the PDA sector have been picking Microsoft-based PDAs to overtake Palm in the handheld market, yet Palm has persevered and maintained market dominance, Coster said.

"If [Palm can really do a good job with Palm OS 5, there's no reason that it should happen," he said.

Palm shares closed at 76 cents Monday, up 3 cents, on the Nasdaq stock market. Palm's stock rose another penny in extended trading.

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