Palm's Annual Report Gives Hints of the Future

Palm has filed their fiscal year 2000 annual report with the SEC. It reveals some interesting things about Palm's plans for the future and confirms a few others.

To no one's surprise, sales of their handhelds still make up the lion's share of their revenues. They predict that licensing the Palm OS and their wireless Internet access service (Palm.Net) will make up a "relatively small portion of our total revenues" in FY 2001, though they predict an increasing percentage will come from these in the future.

They predict lower gross margins for the entire coming fiscal year, blaming this on, "increased competition, introduction of new handheld devices, supply constraints for certain components, and an increased percentage of our revenue being derived from licensing and wireless Internet services and solutions. "

They will continue to make "significant strategic investments" next year, which will focus on "development and introduction of new products and Internet solutions, continued expansion into new customer segments and geographic regions, as well as other marketing investments"

Most interestingly, they say, "We intend to make strategic acquisitions".

Their gross profit was $444.5 million in FY 2000, a 79% increase over the previous year. They spent $75.8 million on R&D, an increase of $29.8 million or 65% over FY 99. They spent $236.8 million on sales and marketing.

The full report is available here.

Do you have any suggestions for Palm's management for a "strategic acquisition"? Should they invest in wireless companies or software development shops, and which ones? Do you like the ones they've make already, like Actual Software? Your comments are welcome. -Ed