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Palm Ends Fiscal Year With Momentum

In its first quarterly update since announcing is merger with Handspring , Palm Inc. , which will soon split its two operating units (Palm Solutions Group and PalmSource) into two separate companies, said on Tuesday that it is still in the red but momentum is returning to its business lines.

The Milpitas, Calif.-based company announced net losses of $15 million, or 51 cents a share, for the fiscal fourth quarter after several one-time charges for lease obligations, severance and the pending PalmSource spin-off. Revenue declined 3.2 percent to $225.8 million, which represents an 8-percent increase from the fiscal third quarter that ended in February. Palm's fiscal year ended May 31.

"We end the year with favorable momentum on virtually every key metric of our corporate dashboard," said Eric Benhamou, Palm, Inc. chairman and interim chief executive officer. "We are gratified to see our efforts to reinvigorate product innovation and to re-energize the market rewarded and our unit demand return to positive growth territory. While the economic context continues to be a challenge, we believe our opportunities for growing shareholder value have improved."

The results cap off a year that is nothing short of revolutionary for the handheld computer pioneer. In addition to the stunning Handspring merger, Palm rebranded its own product lines into two sub-brands to target two distinct customer segments: Zire for individuals and Tungsten for mobile professionals. Over the past year, the company introduced five handhelds into those sub-classes.

But Palm has also been feeling the heat of head-to-head competition with Microsoft, which yesterday just announced it re-jiggered its own mobile OS strategy to capture more of the handheld computing market. Over the past year, Palm bowed its next-generation OS 5, which takes advantage of the ARM processor architecture, and increased the public number of Palm OS licensees from nine to 15. Palm's next generation OS 6 is expected to ship to vendors in October.

On the hardware side, Palm shipped approximately 931,000 Palm handhelds during its fourth fiscal quarter, and nearly 4.2 million Palm handhelds during fiscal year 2003. That brings the total number of Palm branded handhelds shipped to-date to more than 22.3 million. Approximately 1.5 million Palm Powered handhelds, including those sold by Palm OS licensees, were shipped in the quarter, and 29.1 million have been shipped to date.