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Handspring sales meet lowered expectations

The handheld maker reports a loss that narrowly beats estimates, while its sales meet lowered expectations.

Handheld maker Handspring on Wednesday reported a loss that narrowly beat estimates, while its sales met lowered expectations.

The company also said it is laying off about 40 employees, or 9 percent of the company's work force of 460.

Excluding charges, Handspring posted a loss of $32.4 million, or 29 cents per share, for its fourth quarter ended June 30. In the same quarter a year ago, the company reported a loss of $5.8 million, or 13 cents per share.

A consensus of analysts expected a loss of 32 cents per share, according to a survey by First Call.

In early June, the company lowered its sales estimates for the fourth quarter. It roughly halved its earlier prediction of $121.3 million in revenue, saying it would instead bring in $60 million to $65 million.

Revenue for the quarter came in at $61 million, about 18 percent above revenue of $51.8 million in the same quarter last year.

Revenue growth for the quarter as well as for the year has been lower than was anticipated at the beginning of the year. An inventory glut and ensuing price war with handheld rival and licensing partner Palm has hurt both companies. Despite the challenging year, Handspring executives have been looking for the silver lining.

"While we are disappointed with fourth-quarter revenue results, the projected $371 million in revenue for the year is a 264 percent increase over last year," Handspring Chief Financial Officer Bernard Whitney said.

Including special charges, Handspring's net loss for the fourth quarter was $67.2 million, compared with a $19.5 million loss in the same period last year. The company wrote off $26.8 million for excess inventory of components that it won't use. The company will cut back production of handhelds to meet slowing demand in the market.

"We have adjusted to the rapid economic downturn and have taken steps to reduce our rate of spending while continuing our investment in future products," Handspring Chief Executive Donna Dubinsky said in a statement.

Dubinsky added that the company is expecting to reach profitability by the fiscal year-end 2002.

The company offered estimates for the coming quarters. Whitney said that for the current quarter, the fiscal first quarter for 2002, revenue is expected to be in the $60 million to $64 million range. The following quarter's revenue will be in the $88 million to $94 million range with the total revenue for the calendar year being roughly $330 million to $340 million. Earnings per share for the calendar year are expected to be a loss of 75 cents to 78 cents.

Whitney said he expects the company to use $60 million to $65 million of its cash reserves, which is considerably higher than the typical $5 million to $10 million rate. Whitney added that the company should return to the typical cash burn rate by the next quarter.

By the end of the year, the company is expected to have $75 million in working cash and a total of $130 million, including restricted funds.

"I'm confident we have enough cash to bridge us to profitability," Whitney said.

In the mean time, the company will be aggressively cutting costs to reduce operating expenses. In addition to the layoffs, those reductions include postponing facility expansion. However, Dubinsky added the areas where cuts will not be made are in research and development, where plans for wireless communications products are being hatched.

Dubinsky declined to give details about the company's wireless plans, but said the company would be making announcements before the end of the year.

The company also announced the promotion of Ed Colligan from senior vice president of marketing and sales to chief operating officer. Colligan, one of the founding members of the company, will be responsible for engineering, manufacturing and customer service, in addition to marketing and sales.