Palm has announced that third-quarter revenue fell sharply compared to the third quarter of last year and it posted a loss - even after excluding a pair of charges.
In addition, chairman of the board and interim chief executive officer at Palm, Eric Benhamou, said that the spin-off of its PalmSource operating system division would be delayed as the amount of time needed to complete the split will be longer than the previous expectation that the two companies would separate by mid-year,
The company posted revenue of $US209 million, in line with reduced guidance provided last month, but down from last year's third-quarter revenue of $US293 million. Net loss was $US172 million, that included a restructuring charge of $US40 million and impairment charges of $US102.5 million. For the third quarter of 2002, net income was $US2.9 million.
The impairment charge consisted of a $US100 million reduction of the carrying value of 15.8 company-owned hectares in San Jose and $US2.5 million in impairment of intangible assets.
Silicon Valley real estate prices aren't what they used to be. The land was worth $US160 million in early 2001 and the charge reflects the current appraised value of $US60 million, senior vice-president and chief financial officer, Judy Bruner, said.
Excluding the charges, Palm lost $US26.5 million, or $US0.91 per share, in line with analyst expectations as surveyed by Thomson First Call.
Expensive handhelds have not sold very well as companies and consumers have cut back on their spending. In its third quarter, Palm introduced the Tungsten W, a $US549 handheld with GSM/GPRS (Global System for Mobile Communications/General Packet Radio Service) voice and data capabilities. And despite a price cut of $US100 in the price of its sister Tungsten T handheld, sales of both handhelds were not strong enough to generate a profit.
Palm had forecast stronger demand for the high-end handhelds, and while that didn't materialize, the Tungsten T price cuts did spur an increase of 75 percent in sales of the unit in February as compared to January, Bruner said.
The average selling price of Palm handhelds was $US169, Bruner said. The Tungsten T currently sells for $US399 while Palm's lowest-priced handheld, the Zire, sells for $US99.
Palm took in 57 per cent of its revenue from sales of its handhelds in the US but growth was strong in Europe, she said.
The financial situation at Palm will get worse before it gets better.
Palm expected fourth-quarter revenue to be between $US185 million and $US200 million, down 15 to 20 per cent year over year, Bruner said.
New handhelds would come out in the spring, but that launch would occur in the middle of the company's fourth quarter and probably have limited impact on its financial results, she said.