Palm Q1 results top forecasts

PALO ALTO: Palm Inc., the No. 1 maker of hand-held computing devices, on

Monday reported fiscal first-quarter operating results that topped analyst

forecasts as revenues more than doubled.

The Santa Clara, Calif.-based company, which was recently spun off from 3Com

Corp., said that for the period ended Sept. 1, operating profit rose to $23.9

million, or 4 cents a share, up from $10.0 million, or 2 cents, a year ago.

Revenues rose to $401.0 million from $176.5 million.

On that basis, the results topped profit forecasts of 2 cents a share,

according to First Call/Thomson Financial.

It was the third consecutive quarter in which revenues doubled from a year

ago. Palm said it shipped about 1.5 million Palm devices in the quarter,

bringing the total number of Palms sold to 8.7 million.

Including amortized goodwill and intangible assets, purchase in-process

technology and separation costs, Palm had a net income of $17.3 million, or 3

cents a share, up from $9.7 million, or 2 cents, a year ago.

Since the introduction of the Palm VII, a personal digital assistant that

connects with the Internet wirelessly, about a year ago, Palm has been moving

aggressively into the wireless arena.

On Monday, the world's No. 2 mobile phone maker Motorola Inc. and Palm said

they would team up to develop co-branded mobile smart phones that provide e-mail

access and can store calendars and address books.

"The Internet has gone mobile and we're leading the transformation with

devices that connect wireless, said Palm's chief executive Carl Yankowski in a

statement.

Sales of its m100, a low-priced Palm that it started selling for $149 in the

quarter, are brisk, Yankowski said on a conference call. He said the devices are

popular with students, and that more than 300 companies have put programs in

place either to buy or subsidize the purchase of Palms for their workers.

Yankowski added that the company's strategy to evolve into a "truly

Internet-focused company" is "working."

The average price for its Palm devices was $240, down from $262 in the fourth

quarter, largely due to the introduction of the m100, said Palm's chief

financial officer Judy Bruner.

Palm's sales were above most analyst expectations of $385 to $390 million.

Merrill Lynch said in a note to clients before the earnings report that it would

"not be surprised if the company achieved in the $400 million to $410

million range."

In addition to selling its own handheld Palm electronic organizers the

company also licenses the Palm operating system software to others, including

Sony and Handspring Inc. That means while also supplying such customers with the

Palm OS it also makes them competitors.

Already, Handspring said on Monday it would start selling in the United

States in November a snap-on device that transforms the Visor handheld device

into a mobile phone.

But the Palm-Motorola phone will not be available until early 2002,

potentially giving Handspring and Research in Motion, maker of the popular

Blackberry wireless e-mail device, a leg up on Palm and other cell phone makers.

Shares of Palm, which held its initial public offering in March, rose 7/16 to

52-1/4. The shares are well off their record high of 165 reached March 2, though

above their low of 19-7/8 on May 24.

(C) Reuters Limited 2000.