Palm hands in revenue warning
Published: 03 Mar 2003 16:24 GMT
Palm has warned of lower-than-expected sales for its third fiscal quarter. The handheld maker said revenue for its quarter, which ended last month, will come in at $205m to $210m (£130m to £132.9m), compared with its previous expectation of $230m to $250m.
Palm on Monday blamed the revenue warning on lower-than-anticipated sales in the US of its high-end Tungsten handhelds.
Adding to its woes, Palm -- which cut about 19 percent of its work force in the quarter -- said it expects to take additional charges of up to $2.7m related to the settlement of two legal matters. The company did not offer specifics on the matters.
Palm, which has the largest share of the handheld market, suffered alongside the overall market during 2002. Worldwide shipments of handhelds declined by about 9 percent year over year to 12.1 million units during 2002, according to market researcher Gartner Dataquest. Palm shipments declined about 12 percent to 4.4 million in 2002, the research firm said.
Palm also said that demand for its low-priced and midrange handhelds met expectations in the US and that sales were strong across the board in Europe. But the company said sales of its top-of-the-line Tungsten models didn't turn out as expected in the US, even after it reduced the price of its Tungsten T model by 20 percent in early February.
The company, which blamed Tungsten's weak sales on the depressed state of the business market, said that the price cut helped to spur demand, but not enough to offset the weaker market.
"Economic uncertainty weighed more heavily than we originally anticipated on both the consumer and enterprise segments of the handheld industry," chief executive Eric Benhamou said in a statement. "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."
Last week, Palm said it cut about 200 jobs over the quarter. Its PalmSource subsidiary, set to be spun off from Palm in the first half of this year, let go of 18 percent of its employees last month.
Palm will take previously announced charges of $40m to $45m during the quarter, related to severance and real estate. It also intends to take a non-cash charge of about $100m to reduce the carrying value of 39 acres of land it owns in San Jose, California.
Palm reports earnings March 20.
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