Palm Reports Slight Net Profit
Palm Inc. has just reported that it earned a small net profit during its most recent financial quarter. The company earned $2.9 million, or 1 cent per share, during the months of December through February, typically the slowest quarter of the year for handheld sales. Last quarter the company had a net loss of $25.2 million. The company had revenues of $292.7 million, up very slightly from the previous quarter. This is about 10% higher than Palm's CFO Judy Bruner predicted for this quarter back in December and almost $40 million higher than analysts had thought. This is the third quarter in a row that revenues have increased.
However, the profit was so slim that after the effects of costs related to inventory, goodwill and restructuring charges, the company had a pro forma net loss of $14 million, or 2 cents per share. During its previous quarter, the company had a pro forma net loss of $36.6 million, or 6 cents per share.
The analysts' consensus estimate was for a pro forma net loss of 4 cents a share.
The amount of cash the company has on hand increased this quarter, rising from $242 million to $285 million.
"We're pleased to report our third consecutive quarter of improved financial results, despite the traditional post holiday seasonal slowdown," said Eric Benhamou, Palm's chairman and CEO. "Tangible progress across virtually every aspect of our income statement and balance sheet gives us increased confidence in our ability to execute and to return to profitability.''
Speaking of returning to profitability, in a conference call with analysts after this announcement, Mr. Benhamou committed to making a pro forma profit in the current quarter. During the same call, Ms. Bruner predicted that revenues would be between $290 million and $300 million.
During this same call, they said that sales of the m515 and m130 have taken off but the i705 isn't doing as well. These new models have pushed up the average selling price for the company's handhelds. Gross margins were better than expected at 29.1%. Palm's average selling price climbed from $164 to $183.
This is the first quarter Palm reported the results separately for its PalmSource subsidiary. PalmSource had revenues of $19.5 million, $11.7 million of which came from the licence fees Palm pays PalmSource to use the Palm OS. After expenses, PalmSource had a pro forma loss of $1 million.
PalmSource is the part of Palm responsible for developing the Palm OS. It plans to split PalmSource off as a separate company someday.
Palm shipped 1.3 million Palm-branded handhelds during this quarter, bringing the cumulative total to 17.2 million, and contributing to the alltime total of more than 21 million Palm Powered handhelds ever shipped.
If Palm paid PalmSource $11.7 million in licencing fees for 1.3 million handhelds, a little math shows that Palm's licencing fee must be $9 a handheld.
Palm shares rose to $3.26 from a Nasdaq close of $3.17 in aftermarket trade. Taking this into account, the company gained almost 10% during the day.
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