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PalmSource Sales Slide 13%, Loss Widens

Sunnyvale, Calif. — PalmSource recorded a 13 percent plunge in fiscal first quarter revenue, sliding to $15.8 million, from a year-earlier $18.2 million. At the same time, the software arm of Palm — prior to a spin-off two years ago — reported a reorganization of key departments.

In mid-September, the expected acquisition of PalmSource was consummated with Japanese software company Access for $324 million.

In its first fiscal quarter, PalmSource widened its net loss to nearly $2 million, from a loss of $164,000 in the same three months last year. Gross margin for the quarter was roughly flat at 93 percent.

Excluding items, the company reported net income of nearly $200,000 during the first quarter, compared with net income of $832,000 in the same three months the prior year.

The company reported an operating loss of $2.7 million in the first quarter, compared with a $2.2 million operating loss year-on-year.

During the first quarter, PalmSource, which makes Palm OS, an operating system powering smart mobile devices, executed a previously announced restructuring plan in its product development and sales groups, and implemented cost-cutting initiatives designed to improve operating performance.

The company, which develops software for mobile phones and other mobile devices, said the restructuring efforts led to reduced operating expenses and contributed to sequentially higher operating margin, when compared with the fiscal fourth quarter of 2005.

Palm OS licensees reported shipping a total of about 1.2 million units during the first quarter, of which 44 percent were smartphones or wireless handhelds, and 56 percent were traditional PDAs and other mobile handheld devices.

This numbers compares with a total of about 1.4 million units shipped in the first quarter of last year, of which 21 percent were smartphones and 79 percent were PDAs and other mobile handheld devices.