Palm Sees Q1 2002 Loss, Airs Midrange PDA

Top personal digital assistant maker Palm Inc. Thursday reported a loss of $38.7 million, or 7 cents a share, for Q1 2002, but still beat the 9-cent loss expected by analysts from UBS Warburg and Credit Suisse First Boston.

Chief among the metrics for the news is Palm’s precipitous plummet in sales, which dropped 47 percent from the year-ago quarter, down $214 million from $401 million.

Palm’s Chief Executive Officer Carl Yankowski was upbeat in a public statement after the bell.

“While there is much yet to do, we made significant progress on key operational goals in the quarter despite continuing worldwide economic uncertainty and growing competition,” said Yankowski.

UBS Warburg Wednesday said it expected a loss view for Palm, estimating a loss of 9 cents a share from 2 cents a share for 2002. CSFB, too, pegged Palm’s loss at 9 cents per share and predicted in a research note that a decline in consumer confidence resulting from Sept. 11’s events will hurt sales of consumer electronics and computing devices going forward.

The tragedy will affect Palm in more ways than one as it also canceled its PalmSource 2001 developer conference. The event, which will be scheduled for later this year or early next year, was slated for Oct. 23-26 at the San Jose Convention Center in California.

On the product side, Palm Thursday began rolling out a $249 handheld with features from both its lower-end m100 and higher-end m500 series. The play comes a few days after rival Handspring Inc. released two new midrange Visor handhelds.

Targeted for the middle market consumers, such as teachers and students, the m125 looks like the low-end devices models issued in March, but features the dual
expansion capabilities of its high-end series, supporting both Secure Digital and MultiMediaDisk expansion formats.

The PDA uses a 33 MHz Dragonball VZ processor and comes with 8MB of RAM. And, akin to the company’s higher-end devices, the m125
supports USB connections for synchronizing data with PCs. One attractive value
proposition of the m125 is the $100 worth of software bundled within it, as is typical with Palm’s PDAs, including apps that enable e-mail, photos and content to be read and seen.

Kevin Hell, senior vice president of product management for Palm, cited in a company statement an example of how the m125 was meant
to appeal to both college students and corporate employees on the go.

“A college student, for instance, can add a portable keyboard to manage a heavy schedule, communicate with teachers and friends, and
take notes during lectures,” Hell said. “A busy professional, on the other hand, can add a sleek, wireless modem to send and receive
email, or use a 16MB memory card to back up important Word and Excel documents.”

Palm said the m125 is shipping immediately. The company will make available seven new PalmPak content cards in November, including
a Rand McNally Atlas card, language translator card and three eBook cards featuring works from the personal finance, mystery
and science fiction genres.

Although Palm reported a loss due in great part to a slowdown in consumer spending, research firm Gartner Dataquest noted that it isn’t the only firm negatively impacted by the closed fists of enterprises and consumers. In August, it said PDA shipments reached 2.8 million units in the second quarter of 2001, a 21 percent decline from the first quarter of 2001.

Indeed, Palm felt the sting as Gartner said it lost significant market share since the first quarter of this year while Compaq doubled its market share because of its success in the corporate market, further underscoring analyst claims that the enterprise is where PDA makers can make money. According to Gartner, Palm’s shipment share of the PDA market for the second quarter of 2001 sat at about 32 percent, with Compaq the nearest rival at half that. Handspring got bumped down to third place, or 10.7 percent of the market share.

“The corporate market offers the greatest opportunity for PDA vendors. There have been strong consumer shipments in the past, but the consumer market is much less profitable and is not likely to grow as fast as the corporate market. PDA vendors that do not have a strong enterprise strategy will miss out on the bulk of market growth over the next year,” explained Todd Kort, principal analyst of Gartner Dataquest’s Computing Platform Worldwide group.

Kort also said there are further inroads to be made in the corporate sector as device makers will begin to add packet-switched wireless e-mail capabilities next year.

— David Haskin, managing editor of sister site allNetDevices, contributed to this article.

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