Palm warns on revenues

3 Mar 2003

Handheld manufacturer Palm today announced that its third quarter fiscal 2003 results will be below the guidance given on its second quarter results conference call in December.

Revenues now are expected to be between US$205m-$210m, compared to previous guidance of US$230m-US$250m. Gross margins are expected to be close to 30pc compared to the low 30pc range for the two previous quarters. Pro forma operating expenses are expected to be close to previous guidance.

The company said that the primary reason for the weaker results is lower than expected demand at the high end of the market in the US, in part attributable to continued weakness in enterprise IT spending in the handheld space. Demand for entry and mid-range products has been in line with Palm’s expectations and demand in Europe was strong for all products. Palm’s premium handheld, the Tungsten T, comprised a lower than expected percentage of the mix during the quarter. However, it said the Tungsten T price reduction implemented in early February has helped to spur demand, but not enough to offset market weakness for high-end products.

“Economic uncertainty weighed more heavily than we originally anticipated on both the consumer and enterprise segments of the handheld industry. Despite these challenges, we continue to execute well operationally and we are fully confident in the magnitude of our long-term business opportunity,” said Eric Benhamou, Palm chairman and chief executive officer. “We continue to take aggressive actions to return to sustained profitability and we remain committed to completing the transformation of Palm into two successful leadership companies in the handheld space.”

The news follows hot on the heals of the announcement on Friday that the company’s hardware division, Palm Solutions had laid off 200 workers, almost 15pc of its workforce.

By Dick O’Brien