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Palm Q3 Revenue Slides 28.6%

Milpitas, Calif. – Handheld computer maker Palm watched revenue decrease 28.6 percent in its fiscal third quarter, down to $209 million, from $292.7 million in the year-ago period.

Saddled with higher sales of older, lower priced and lower margin products, rather than more profitable high-end models, the company registered a net loss in the third quarter, ended Feb. 28. This totaled $172.3 million, including restructuring charges of $40.2 million and impairment charges of $102.5 million. In the third quarter of last year, Palm reported a $2.9 million net profit.

Excluding all charges in the third quarter, Palm’s net loss nearly doubled, to $26.5 million, up from a $14 million loss the previous year.

Palm, which is divided into two subsidiaries, reported revenue of $197.9 million for its larger Solutions Group, which is responsible for Palm-brand handhelds and accessories. This compares with $284.3 million in the same quarter a year earlier. Group loss before taxes reached $165.1 million, compared with a profit of $7.4 million the previous year.

Palm said it shipped about 1 million Palm-brand handhelds in the third quarter, down 22 percent from the 1.29 million units shipped in the same period a year ago.

The newer PalmSource subsidiary, with responsibility for developing and licensing the Palm platform, enjoyed revenue of $26.3 million in the quarter, up from $20.4 million year-on-year. Segment income before taxes for the three months hit $1.4 million, compared with a loss before taxes of $3.2 million in the same period last year.

‘The progressive recovery of the handheld industry is continuing, although still held back by weak economic fundamentals,’ said Eric Benhamou, chairman/CEO. ‘Palm is determined to return to profitability, without sacrificing its participation in the growth drivers of the next chapter in the handheld industry,’ he said.

For the nine months, Palm revenue dropped to $646.2 million, down about 19 percent from the $797.5 million recorded in the year-ago period. Net loss for the nine months, including charges, reached $427.6 million, compared with a loss of $54.7 million year over year. Excluding all charges, Palm net loss for the nine months reached $57.2 million, down from a loss of $89.3 million in the same period a year ago.

Solutions Group revenue for the nine months hit $620.5 million, a decrease from the $778 million reported in the same period a year earlier. Loss before income taxes reached $188.3 million, compared with a loss of $59.9 million the previous year.

Nine-month PalmSource revenue came in at $56.1 million, up somewhat from the $51.4 million recorded in the same period the previous year. The segment reported income before taxes of $430,000 for the nine months, up from income of $103,000 a year earlier.

Palm anticipates revenue in the range of $185 million to $200 million in its fourth fiscal quarter, a 15 percent to 20 percent decrease year over year.