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Palm Slims Loss, But Wireless PDA Rollout Is Delayed

Palm announced a lower-than-expected loss of $38.7 million, excluding charges, for its fiscal first quarter, but said it no longer expects to return to profitability in the second quarter, due in part to the uncertain economy caused by the recent terrorist attacks.

In addition, the company plans to delay the launch of its much anticipated integrated wireless handheld until after the holiday selling season.

Sales for the quarter were $214 million, compared to $401 million for the same quarter a year earlier.

Palm cited improved U.S. sales in June and July and said it was able to reign in inventory surpluses and decrease channel inventories by 35 percent for the quarter to achieve the four- to eight-week levels it had predicted, according to senior VP/CFO Judy Bruner.

She noted, however, that August sales were down 15 percent over the same period in 2000 due to the soft economy and competitive price drops. This, combined with the recent terrorist attacks, caused Palm to expect flat fiscal second quarter sales and to delay the release of the integrated wireless handheld.

CEO Carl Yankowski responded to questions following a conference call yesterday afternoon. “We didn’t want to launch near Christmas. We have a very different economic environment and an overlay of consumer apprehension and IT apprehension from the terrorist attacks,” he said.

Bruner also noted, “The terrorist attacks on the United States last week add much further doubt and uncertainty to the worldwide economic forecast. We believe they are likely to [cause] lower consumer confidence and spending, and thus reduce growth that might have otherwise occurred in the fourth quarter.”

Palm’s actual net loss, including charges, for its fiscal first quarter was $32.4 million. Device shipments for the quarter were 747,000 units vs. 681,000 devices last quarter and 1.5 million devices in the year-ago fiscal quarter. Net subscribers declined two percent, from 203,000 at the end of the fourth quarter to 199,000 at the end of the first quarter, Bruner said.

The company spelled out a number of factors other than terrorism impacting its business at present, including a market shift toward low-end products, which is affecting average selling prices and revenues. In addition, the company noted a soft world economy and lower sales in Europe. At the same time, Yankowski said, Palm was making strides in penetrating the enterprise market, where 57 percent of the Fortune 100 companies use Palm products exclusively.