Handspring Q2 loss widens to $32 m, revenues fall

Franklin Paul

NEW YORK: No. 2 handheld computer maker Handspring Inc. on Wednesday said

first-quarter losses widened to $32 million on lower revenues, hurt by tough

competition and slumping demand that has pained the entire handheld industry.

The Mountain View, California-based company also projected losses for its

fiscal second quarter, which ends in December, but said the troubled political

and economic environment makes it hard to gauge how buyers of its pocket-sized

personal information devices will behave.

"I've been around the handheld business for 20 years and I don't think

I've seen a holiday quarter as difficult to project as this one,"

Handspring chief executive Donna Dubinsky told Reuters in an interview.

Experts are puzzled as to whether consumers will travel to shopping malls

with their typical zeal this year, amid the troubled economy and with consumer

confidence shaken further by the Sept. 11 attacks, anthrax scares, and current

military action overseas.

"It's hard to tell, what with the number of layoffs there have been and

the economic uncertainty and a war going on," Dubinsky said. "How do

we project that?"

The challenging environment makes more difficult a market already hurt by a

demand slump. Last month, rival handheld computer maker Palm Inc. said that it

will not likely turn a profit in its second quarter, which ends in November, and

that its revenues will be significantly lower than projections.

Handspring, however says it is encouraged by early opinion of its recently

introduced products, such as the Visor Neo, and hopes to spur demand with the

help of holiday-inspired promotional activity. Shares of Handspring closed on

Wednesday at $2.66, off 32 cents or about 11 per cent.

Second quarter loss expected



Handspring told analysts that the company expects to report a loss of between 14
cents and 16 cents a share in its second fiscal quarter. Analysts surveyed by

Thomson Financial/First Call had forecast a per-share loss in the period in the

range of 12 cents to 25 cents, with a consensus at 16 cents.

"Though the December quarter is typically a strong quarter for this

industry, current economic, political and market issues demand we be

conservative in our expectations," the company said.

It said it expects second fiscal quarter revenues to increase modestly, and

expects to end calendar year 2001 with revenues at $312 million to $316 million,

representing growth of 16 per cent from the previous calendar year. For the

fiscal first quarter, the company's net loss was $32.7 million, or 28 cents on a

per share basis, compared to a loss of $16.3 million, or 17 cents a share a year

ago.

Excluding amortization costs, the company reported a first-quarter loss of 22

cents a share, Handspring said.

The Wall Street consensus loss estimate was 26 cents, while the expected loss

ranged from 16 cents a share to 29 cents a share, according to Thomson

Financial/First Call.

"It looks like a solid quarter, and they hit all the levels they had

previously estimated," said J J B Hillard, WL Lyons analyst Thomas

Carpenter. First-quarter revenues were $61.4 million, off 13 per cent from $70.5

million in the year ago period.

"I am pleased that we were able to meet our revenue and expense targets

for the quarter in spite of a very challenging environment," said

Handspring Chief Executive Donna Dubinsky, in a statement.

The company cited overall economic slowing and increased price competition

for the revenue decline. For the greater part of 2001, Handspring has endured a

price war with rival Palm Inc. , and recently has watched as Microsoft Corp.

rolled out new software for competing handhelds.

Moreover, Handspring's sales have suffered, like many other computer hardware

companies, in the weeks since the Sept. 11 attacks on the United States.

To combat its woes, it has cut prices on its Visor handheld computers by as

much as 25 per cent, and offered new buyers a free attachment, once priced at

$250, that transforms the handheld into a mobile phone.

(C) Reuters Limited 2001.