Job Cuts Continue at Palm

Palm Friday confirmed it has cut a total of 19 percent of its employees and contractors in the last three months as it prepares for the end of its fiscal third quarter.

The company said about 250 people in both its Palm Solutions hardware division and its PalmSource software subsidiary are getting pink slips with severance. The additional lay-offs began Thursday.

The Santa Clara, Calif.-based company cited difficult market conditions as the basis for its decision. Earlier this month, PalmSource announced 18 percent staff reductions as it prepares to split off next month from Palm Inc. The headcount reductions leave Palm with a total of 1300 staff and contractors.

Slumping sales haven’t helped the handheld device maker either. Worldwide shipments of all PDAs fell to 12.1 million units in 2002, a 9.1 percent decline from 2001 results, according to Dataquest, a unit of Gartner.

Palm said its $99 entry-level Zire was a bright spot for company this past holiday season. Even devices running Palm’s operating system have not been immune. Palm OS shipments totaled 6.7 million units, which represented 55.2 percent of worldwide shipments in 2002. It said Windows CE totaled 3.1 million units, which accounted for 25.7 percent of all PDA units.

The problem, say analysts is lack of enterprise buy-in despite the amount of business-friendly applications (calendar, e-mail, database). Gartner says about 70 percent of all PDAs are purchased by consumers and only 30 percent by enterprises.

Palm is working fast to turn that tide. The company’s voice-enabled Tungsten W is making its debut today in the United States. Palm also slashed $100 off its other new business-class device – the Tungsten T.

PalmSource is also banking on some new contracts to boost its sales and market share including Fossil’s Wrist PDA with Palm OS, Garmin’s iQue 3600 GPS-enabled handheld, the Legend Pam168 Chinese-language handheld, and the Sony Clie NZ90 with a two megapixel camera.

Palm is scheduled to release its third fiscal quarter earnings on March 20. Analysts expect the company to lose 32-cents per share.

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