PalmSource Posts Profit, Cuts Jobs
PalmSource today posted a slight profit, mainly due to the sale of the Palm trademark, and also announced a 16 percent reduction in the US workforce amid a reorganization of the Company's product development, administrative, marketing and sales organizations.
For its fiscal fourth quarter and year ended June 3, 2005. Revenue for the fourth quarter of 2005 was $17.3 million, including an early buyout of a licensee's future minimum royalty commitments for $1.5 million, as compared to $17.7 million reported in the year ago quarter. Gross margin was 93 percent as compared to 91 percent in the year ago quarter. GAAP net income was $18.3 million or $1.12 per share, as compared to a GAAP net loss of ($2.9) million or ($0.23) per share reported in the year ago quarter.
Non-GAAP net loss for the quarter was ($0.7) million or ($0.04) per share, as compared to non-GAAP net loss of ($0.6) million or ($0.05) per share in the year ago quarter. Non-GAAP net loss and loss per share for the fourth quarter of 2005 excluded the following:
- $26.7 million for a gain on the sale of assets (the Company's interest in Palm Trademark Holding Company, LLC) to palmOne, Inc.
- $2.7 million for restructuring charges related to the reorganization
- $2.5 million related to the severance package for the Company's former CEO
- $2.3 million for stock-based compensation expense
- $0.2 million for amortization of purchased intangible assets
GAAP EPS for the fourth quarter of 2005 was calculated using diluted shares outstanding of 16.3 million, while non-GAAP loss per share was calculated using basic shares outstanding of 15.9 million shares. GAAP and non-GAAP loss per share for the fourth quarter of 2004 were calculated using basic shares outstanding of 12.6 million shares.
Palm OS licensees reported shipping a total of approximately 1.1 million units during the quarter, of which 37 percent were smartphones and 63 percent were PDA's and other mobile handheld devices. This compares to a total of approximately 1.4 million units shipped in the fourth quarter of fiscal 2004, of which 18 percent were smartphones and 82 percent were PDA's and other mobile handheld devices.
"While we still face significant challenges over the next several quarters, we continue to move forward with our development efforts in the broader mobile phone market," said Patrick McVeigh, interim CEO. "We are committed to our transition to Linux-based platforms that deliver a great user experience."
For fiscal year 2005, revenues were $71.9 million, as compared to $73.1 million in the prior year. GAAP net income for 2005 was $19.5 million or $1.28 per share, as compared to a net loss of ($15.2) million or ($1.40) per share in the prior year. Non-GAAP net income was $4.0 million or $0.26 per share, as compared to non-GAAP net income of $1.2 million or $0.10 in the prior year. GAAP and non-GAAP EPS for 2005 were calculated on a diluted basis using a weighted average of approximately 15.2 million shares. GAAP loss per share for 2004 was calculated using a weighted average of basic shares outstanding of 10.9 million shares. Non-GAAP EPS for 2004 was calculated on a diluted basis using a weighted average of 11.6 million shares.
Reorganization of Product Development, Administration and Sales and Marketing
PalmSource today also announced an internal reorganization of the Company's product development, administrative, marketing and sales organizations. As part of this reorganization, the Company plans to reduce its full-time head count by approximately 16 percent in the U.S. and has taken a $2.7 million restructuring charge in its fiscal fourth quarter of 2005, primarily related to employee severance arrangements. Over half of the head count reductions were middle and senior management positions, including three senior vice presidents. The Company expects annual salary savings of approximately $6.0 million in fiscal year 2006 related to the reorganization.
"This reorganization reflects the evolution of our business model, as we have taken action to tighten our focus over the next 12 months," said Jeanne Seeley, PalmSource's chief financial officer. "By streamlining our product development efforts and administrative functions, and combining our sales, marketing and business development activities, we not only expect to increase internal synergies between these groups, but we are also aligning our cost structure with the reality that we are in a new product development period."