Palm CEO: Turnaround Taking Hold

Palm Computing

Palm reported revenue of $292.7 million for the quarter ended March 1, up 1 percent from the preceding quarter but down 38 percent from the same quarter last year.

The company said pro forma loss, excluding the effects of excess inventory and other charges and benefits, totaled $14 million, or 2 cents per share. That compares with a loss of $36.6 million, or 6 cents per share, in the prior quarter and $9.3 million, or 2 cents per share, for the third quarter last year. Analysts had expected a loss of about 4 cents per share this quarter.

"A turnaround is taking hold and we are trying to deliver a profit by spring," Eric Benhamou, Palm's chairman and CEO, said in an analyst conference call.

Benhamou said Palm will continue to take cost-saving steps to improve profits, including seeking office space out of Northern California, its longtime base at the 3Com headquarters in Santa Clara, Calif. Palm will look for space in a lower-rent location, he said.

In addition, Palm's CEO promised three additional enterprise-related agreements before the summer. The company already maintains a partnership with Siebel Systems, which provides mobile capabilities for its CRM software.

On a conference call with analysts, Palm executives acknowledged some setup problems with the new i705 wireless handheld product. Some consumers were having trouble setting up the device for wireless e-mail access, executives said, but better setup instructions and technical support should help. But they also pointed out that the product is aimed at the enterprise and was originally conceived to be set up by IT organizations.

Palm's behind-the-firewall e-mail solution intended to be used by the enterprise with i705 handhelds will stay in beta for another "90 days at least" to work out all the bugs, Benhamou said during the call.

While Palm licensees, such as Handspring, are focusing on combination phone/PDAs, Benhamou said Palm will continue to provide data-centric models. But he noted that the enterprise will see several different versions of Palm devices based on the new 5.0 operating system and ARM-based chips by the end of the year.

The enterprise also can expect full support for Sun's Java J2ME in version 5.0.

Palm said it earned $284.9 million in income from the Palm Solutions Group--its hardware division--while the Palm Source software division earned $19.5 million. Palm Source has the highest margins, however, reporting a 95.1 percent margin rate.

Benhamou expects 2003 to be a stronger year as handheld sales pick up after the economic slump. The company expects revenue growth rates next year to reach 20 percent.