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PalmOne reports profitable quarter

Increased demand for its smart phones helps deliver profitable quarter.

Narrowing losses for the year, handheld maker PalmOne reported rising revenue and a profitable quarter led by demand for its smart phones.

The Milpitas, Calif., company said Monday that sales for its fourth quarter, which ended May 28, were $267.3 million, compared with $217.1 million in the same period a year ago. The company reported a profit of $13.3 million, or 27 cents a share, compared with a loss of $15 million, or 51 cents per share, a year ago.

For its fiscal year, revenue was $949.7 million, up from $837.6 million last year. PalmOne had a loss of $21.8 million, or 55 cents per share, for the year compared with a loss of $442.6 million, or $15.23 per share, last year.

Excluding amortization of intangible assets, deferred stock-based compensation and restructuring charges, income for the quarter was $15.9 million, or 32 cents per share, compared with a net loss of $8.2 million, or 28 cents per share, for the same period a year ago. For the year, excluding charges, the company had a profit of $8 million, or 19 cents per share, compared with a loss of $55.6 million, or $1.91 per share.

Analysts were expecting a profit of 13 cents per share for the quarter and a loss of 20 cents per share for the year. Analysts' estimates, according to survey firm First Call, were non-GAAP (generally accepted accounting principle) numbers that took into account charges.

PalmOne shares closed up 5 percent Monday. In after-hours trading, the stock shot up more than 15 percent, rising $3.24, to $24.70 per share in response to the strong quarterly report.

PalmOne's chief executive credited consumer demand for the fiscal year's strong finish. "We achieved profitability for the quarter, and demand remains strong for our handheld and smart phone products," PalmOne Chief Executive Todd Bradley said in a statement.

Predicting the smart phone shift
Handhelds accounted for about 72 percent of revenues, while smart phones made up 28 percent. The company expects that to shift to roughly 50-50 by the end of the next fiscal year.

Smart phones tend to bring in more revenue and have better margins than handhelds. PalmOne's Treo 600 combination organizer and cell phone have been driving growth at the company, but a shortage of displays for the devices has limited supply. Bradley said the company found another supplier, but it was late in the quarter. He said the impact of the new supplier would be felt in the next quarter.

Newly appointed president of PalmOne Ed Colligan said additional carriers would be selling the Treo 600, but most of the demand would come from existing partners. Cingular, Sprint, AT&T and T-Mobile USA currently support the Treo 600.

Verizon Wireless continues to test the Treo 600 on its cellular network, Colligan said.

The company revised its fiscal year 2005 guidance and said revenue would be between $1.21 billion to $1.29 billion, which is roughly $158 million more, or 15 percent, than the previous revenue guidance.