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Palm Reports Record Smartphone Sales

Sunnyvale, Calif. — Palm reported record sell through in smartphones for its fiscal third quarter ended March 2, 2007 due to lower prices and increased spending on brand marketing, however net income fell to $11.8 million from $29.9 million.

Smartphone unit sales reached 738,000, up 30 percent over the quarter last year, and up 20 percent over the previous quarter, Palm said. Revenue increased to $410.5 million in the third quarter, up from $388.5 million for the quarter last year.

Palm said smartphones now represent 86 percent of its revenue or a total of $354.1 million, compared to 14 percent in handhelds, totaling $56.4 million, and 277,000 units. Handheld sales are declining at a faster than expected pace of about 40 percent, expected to continue at that rate in the next quarter, said the company. Colligan noted, however, that the category continues to be profitable and that it brings new customers into the market.

Palm is expected to encounter strong competition from the Apple iPhone, due for release this June. Palm president and CEO Ed Colligan on its earnings call yesterday, said, “If Apple brings a product into the market, they had a demonstration… we’ll compete as effectively as we can.” Colligan also noted that low price is an important factor in the smartphone market. The Apple iPhone is expected to carry prices of $499 and $599.