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palmOne Revenue Rises 23%, Pushes Co. Into Black

Milpitas, Calif. — Strong demand for its handheld and smartphone products — namely the Treo 600 combination mobile phone and digital organizer — helped palmOne move into the black during its fiscal fourth quarter.

Net income hit $13.3 million for the three months, compared with a loss of $15 million in the year-ago period.

The handheld computer and communications hardware and software solutions company increased its fourth quarter revenue 23 percent, reaching $267.3 million, up from $217.1 million in the same period a year earlier.

This was the fourth consecutive quarter of year-over-year growth, said palmOne, and the first time the company reported a stand-alone profit since the October 2003 spin-off of PalmSource. The company is the hardware end of Palm Inc., which split off its software business at that time.

Excluding the effects of certain deferred compensation and charges, net income in the period, ended May 31, climbed to $15.9 million, compared with a loss of $8.2 million in the same three months in 2003, excluding the effects of restructuring charges and loss from discontinued operations.

Gross margin in the fourth quarter increased to 30.5 percent, up from 26.5 percent in the year-ago three months, while operating expenses were reduced year-over-year.

Inventory fell by $8.7 million in the fourth quarter, compared with the same period last year, while inventory turns rose to 36 from 28 in the comparable three months in 2003.

“We ended fiscal-year 2004 with very good results across virtually every key financial metric,” said Todd Bradley, CEO. “We enter fiscal-year 2005 with an optimistic outlook for accelerating growth and increasing profitability.”

Revenue for the fiscal year reached $949.7 million, up 13 percent from the $837.6 million reported in the previous 12 months. Loss from continuing operations for the 12 months was $10.2 million, compared with a $417.9 million slide a year earlier.

The net loss for the 12 months was reduced to $21.8 million, down from a loss of $442.6 million year-on-year. Excluding the effects of charges, net income for the 12 months hit $8 million, compared with a loss of $55.6 million year-over-year, also excluding the effects of charges.

Despite efforts to ramp up production of the Treo 600, palmOne said strong demand for the product may outpace demand for the coming quarter. For the fourth quarter, Treo sales totaled $75.4 million with ASPs for the smartphones climbing higher than expected. E-mail is becoming a strong motivator for a smartphone purchase, with over 75 percent of Treo buyers saying that e-mail capability was a key factor in their decision to buy a Treo, said palmOne.

The company anticipates fiscal first-quarter revenue ranging between $250 million and $260 million, with revenue for the coming 12 months, ended in May of 2005, ranging between $1.21 billion and $1.29 billion.