Press Room
Palm Reports Q3 2001 Revenue of $471
Million, Up 73% Year Over Year; Pro Forma EPS of $0.02
L owers Q4 Outlook Amid Macro Economic Uncertainties and New-product Transition; Initiates Cost Reduction Program
SANTA CLARA, Calif., March 27, 2001 –– Palm, Inc. (Nasdaq: PALM), a pioneer in mobile and wireless Internet solutions and a leading provider of handheld computers, today reported revenue of $470.8 million for its third quarter of fiscal 2001, ended March 2, 2001, up 73 percent from the $272.3 million generated in the third quarter of fiscal 2000.
Pro forma net income –– which excludes the effects of amortization of goodwill and intangible assets, purchased in–process technology, legal settlements and separation costs –– was $9.3 million, or $0.02 per share for the third fiscal quarter of 2001. This compares to pro forma net income of $15.8 million, or $0.03 per share, for the third quarter of fiscal 2000. Actual net loss for the third quarter was $1.9 million, or $0.00 per share, compared to net income of $11.0 million, or $0.02 per share, for the comparable quarter last year.
Shipments of Palm(TM) handhelds during the third quarter rose 112 percent over the same period a year ago to 2.1 million handhelds. This brings the total number of handheld devices shipped by Palm to date to nearly 13 million.
For the first nine months of fiscal 2001, revenues of $1.394 billion increased by 97 percent compared to revenues of $707.4 million in the year ago period. Pro forma net income for the first nine months of fiscal 2001 was $60.7 million, or $0.11 per share, compared to $41.2 million, or $0.08 per share, for the first nine months of fiscal 2000. Actual net income for the first nine months of fiscal 2001 was $35.6 million, or $0.06 per share, compared to $33.5 million, or $0.06 per share, for the first nine months of fiscal 2000.
Recent Palm Highlights
"Revenue and shipments in the third quarter showed strong year–over–year growth, reflecting a conviction from individual consumers and enterprise customers that Palm handheld computers enhance lifestyles and work productivity, and keep people connected," said Carl Yankowski, Palm's chief executive officer. "Over 1,000 new software applications - many for enterprise and communications uses –– came to market in the quarter for Palm Powered(TM) devices, demonstrating great long–term confidence in our view of computing. With approximately 150,000 registered Palm developers and more than 8,500 software applications available commercially for Palm OS(R) handhelds, the market is telling us we've made the right strategic choices and the right tradeoffs for a superior user experience."
Other recent highlights include:
* Palm announced its m500 series handhelds running on its new powerful Version 4.0 operating system, which includes 16–bit colour and increased security and has support for telephony. This new high–end product line features a Secure Digital and MultiMediaCard expansion slot and enhanced mobile connectivity –– all in an improved, sleek Palm V–like form factor with a Universal Connector and USB connectivity. The m505 handheld has an energy–efficient colour screen that is viewable in all lighting conditions, even in bright sunlight;
* Palm added a second member to its m100 entry–level family with the m105, which features added memory and software for email and Internet connectivity, plus the new standard Palm Universal Connector with USB connectivity;
* Palm launched the beta version of the MyPalm(TM) personal mobile portal, reflecting the successful integration of its AnyDay.com acquisition. The MyPalm portal has registered approximately 270,000 users since its beta rollout in late December; and
* Palm entered into an alliance with Sprint PCS to co–brand and co–market CDMA wireless products and services in North America.
Palm also completed or initiated three acquisitions during the quarter. They are as follows:
* In February, Palm completed its acquisition of WeSync. The Portland, Ore.–based company was acquired for its group, wireless and web synchronization capabilities;
* In March, Palm reached a definitive agreement to acquire Extended Systems Inc. to better meet the needs of the corporate chief information officer and further the company's enterprise offerings. The acquisition, which is expected to close in June 2001, is subject to certain approvals, including that of regulators and Extended Systems' stockholders. Extended Systems provides the software infrastructure companies need to manage multivendor, multiplatform mobile solutions; and
* Concurrent with the launch of the m500 series, Palm acquired peanutpress.com, which includes a web–based storefront featuring approximately 2,000 titles from many of the major U.S. publishing houses. Through this acquisition, Palm also acquired the Peanut Reader, now called the Palm Reader, a leading eBook reader application for Palm OS handheld devices.
Business Outlook
"Palm has recently begun to feel the effects of the deteriorating macro economic environment," Yankowski said, "resulting in a reduced incoming order rate amid signs of what appears to be a sector slowdown. Based on this, we believe that demand is approximately flat to the fourth quarter a year ago in which our revenues were $350 million. At the same time, Palm is going through the most significant product transition in its history, and we currently anticipate volume shipments of the new m500 series in the last month of our fourth quarter. Taking all of this into account, we expect our fiscal fourth quarter 2001 revenues in the range of $300 million to $315 million."
In addition, the company expects to report a net loss in the fourth quarter of approximately $0.08 per share.
Pro forma operating expenses in the fourth quarter are expected to increase to $160 million to $165 million as the company spends to launch its new products and stimulate demand in the channel. Palm plans to reduce its operating expenses through a series of steps that are expected to take full effect in the first quarter of fiscal 2002, resulting in savings of 10 percent to 15 percent from expected fourth quarter levels. The company also expects to incur a one-time charge in its fourth fiscal quarter of 2001 associated with various cost-cutting measures.
Based on its revised outlook, Palm is adjusting its business model and focusing on balance–sheet management to ensure it emerges a stronger company when economic conditions improve. The company plans to reduce its work force by approximately 250 employees and contract workers. In addition, the company is postponing construction of its new corporate headquarters in San Jose, Calif., which was scheduled to begin this month, and is re–evaluating its real estate needs and strategy with the goal of reducing or eliminating cash requirements associated with real estate.
"Through these actions –– combined with our pipeline of powerful and innovative new products, services and Palm OS improvements –– Palm will emerge from this period of economic turbulence and product transition as an even stronger company and a leader in mobile and wireless solutions. We will continue to invest in R&D to drive value–added solutions that reach new customers and new markets, which we're confident will generate growth in our category," said Yankowski.
Safe Harbor Statement
This release contains forward–looking statements. In particular, the release includes a statement about expected fourth quarter revenue. This statement is subject to numerous risks and uncertainties that may cause Palm to have different actual revenue. These risks and uncertainties include the effect of the current economic slowdown, possible fluctuations in demand for existing and new Palm products, the need to successfully introduce and market new products, and the effect of competition. The release also contains forward–looking statements about Palm's plan to reduce operating expenses, the expected resulting savings, and Palm's expectations that it will incur a one–time charge in the fourth quarter of fiscal 2001. These statements are also subject to risks and uncertainties, including the ability of Palm to effectively identify and eliminate expenses, possible fluctuations in future expenses, and significant expenses that may need to be incurred but that are unforeseen at this time. Other risks are explained in Palm's filings with the Securities and Exchange Commission.
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NOTE TO EDITORS: Palm OS is a registered trademark, and Palm, Palm Powered and MyPalm are trademarks of Palm, Inc. or its subsidiaries.
About Palm, Inc.
Palm, Inc. is a pioneer in the field of mobile and wireless
Internet solutions and a leading provider of handheld computers,
according to IDC (December 2000). Based on the Palm OS®
platform, Palm's handheld solutions allow people to carry
and access their most critical information with them wherever
they go. Palm(TM) handhelds address the needs of individuals,
enterprises and educational institutions through thousands
of application solutions.
The Palm OS platform is also the foundation for products from Palm's licensees and strategic partners, such as Franklin Covey, HandEra (formerly TRG), Handspring, IBM, Kyocera, Sony, and Symbol Technologies. Platform licensees also include Acer, Garmin, Nokia and Samsung. The Palm Economy is a growing global community of industry-leading licensees, world-class OEM customers, and more than 160,000 innovative developers and solution providers that have registered to develop solutions based on the Palm OS platform. Palm went public on March 2, 2000. Its stock is traded on the Nasdaq national market under the symbol PALM. More information is available at www.palm.com
Palm OS is a registered trademark, and Palm is a trademark
of Palm, Inc. or its subsidiaries.
