| Subject: Palm profitable in spite of revenue drop |
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Date Posted: 18:02:15 12/18/02 Wed
Palm profitable in spite of revenue drop
By Reuters
December 18, 2002, 3:54 PM PT
Palm, the leading maker of handheld computers, said Wednesday it swung to a fiscal second-quarter profit powered by significant cost cutting and the introduction of two new devices, despite a 9 percent drop in revenues.
Palm's shares rose 12 percent in after-hours trading following the its report of a surprise profit. Analysts had expected the company to report a loss in the quarter.
The Milpitas, Calif.-based company, which dominates the market for pocket-sized digital assistants, said its second-quarter profit, as measured by Generally Accepted Accounting Principles, was $3.5 million, or 12 cents a share, compared with a year-ago loss of $25.2 million, or 89 cents a share.
All earnings per share figures have been adjusted for a recent 1-for-20 reverse stock split.
Excluding costs related to items including inventory and restructuring, Palm's profit was $5.7 million, or 19 cents a share. On average, analysts surveyed by Thomson/First Call had forecast a loss of 15 cents a share.
Revenue for the period was $265 million, compared with $291 million a year ago.
Palm said its results were driven by the successful introduction of two new lines of handheld computer, the low-cost Zire and high-end Tungsten. Palm's fiscal second quarter, which ended Nov. 29, is the period when most retailers buy the bulk of product they will sell during the holiday shopping season.
"Evidently the retailers have been enthusiastic about the Tungsten and the Zire, which resulted in a pretty attractive shipment profile for the quarter," said Sanford C. Bernstein analyst Paul Sagawa.
The company added that during the period it cut pro forma operating expenses to about $84 million from $114 million last year, and improved pro forma gross margins to 32.8 percent from 20.5 percent.
Palm, which is expected in early 2003 to split its software and hardware units into independent companies, said that during the quarter, it shipped some 1.4 million Palm-branded handhelds.
"The handheld industry is declining less rapidly now than it has over the last several quarters and we believe the industry as a whole will grow again in 2003," Eric Benhamou, Palm's chief executive, said on a conference call.
Shares of Palm jumped to $18.84 in after-hours trading Wednesday, after closing at $16.73 on the Nasdaq composite index. The shares have risen by about 55 percent in the past two months.
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