Palm R&D Spending Down Slightly

Palm Inc. has released detailed financial information from its last quarter and it shows that the company, despite running in the red, is keeping its priorities in the right places. It's research and development budget did drop a bit but it was only 8% less than the same quarter the previous year and 8.5% less than the prior quarter. While any decrease in R&D spending in a technology company isn't good, an 8% drop is fairly minimal considering Palm's revenues were down 44% compared to the same quarter the previous year.

This shows up clearly in another figure: R&D expenses were equal to 13% of Palm's revenues, as compared to 7.8% for the same quarter a year ago.

In raw numbers, Palm spent $37.7 million on R&D during its most recent quarter and $78.9 million over the last six months.

According to Palm, "the decrease in absolute dollars reflects decreased personnel and project expenses." This is their way of saying they had some layoffs and dropped some projects, like their online portal, MyPalm.

Palm simply can't afford to cut too much out of their R&D budget. They are in the process of creating OS 5, which could very well be a make-or-break project for the company and the whole Palm platform. OS 5 is the next generation of Palm operating system which will make the jump from Dragonball -based handhelds to much more powerful ARM-based ones.

Palm also needs to develop hardware to run the new OS. While the company has just completed spinning its software division off as a subsidiary, the two parts are still reporting combined financial results. This should change at the end of this quarter.

Palm made much larger cuts in its advertising budget. Sales and marketing expenses were $60.8 million for its last quarter, decreasing by 32% as compared to the same quarter the previous year.

Related Information:

• Palm's Quarterly Report (SEC form 10-Q)
• PIC: Palm Quarterly Revenues Up 36%
• PIC: Palm Forum