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Handspring loss slimmer than expected

The handheld maker beats analyst predictions for earnings, while its sales drop to $61.4 million compared with $70.5 million in the same quarter last year.

Handspring reported a narrower-than-expected quarterly loss Wednesday, excluding charges.

The Mountain View, Calif.-based handheld maker posted a loss of $26.2 million, or 22 cents per share, excluding charges, in its fiscal first quarter of 2002 that ended Sept. 29, according to a company representative. Sales came in at $61.4 million.

A consensus of analysts expected a loss of 26 cents per share, according to First Call.

Including charges, the company reported a loss of $32.7 million, or 28 cents per share, in its latest quarter. In the same quarter a year ago, the company lost $16.4 million, or 17 cents per share, including charges, on revenue of $70.5 million.

Chief Executive Donna Dubinsky was upbeat about the results, given the price war in the handheld industry and the poor economic conditions.

"I am pleased that we were able to meet our revenue and expense targets for the quarter in spite of a very challenging environment," she said in a statement.

During a conference call, Dubinsky also said the company is still on track to reach profitability by the end of fiscal year 2002.

Regardless, Chief Financial Officer Bernard Whitney offered a cautious forecast for the current period, its fiscal second quarter.

"We are expecting a strong December quarter. But given current economic conditions, we are being conservative with our forecasts," he said.

The company expects revenue in the current quarter to come in at $66 million to $69 million--a modest growth of 8 percent to 12 percent over the previous quarter. For the calendar year, Whitney said, Handspring expects revenue of $312 million to $316 million, or about 16 percent growth over the previous year.

Whitney added that the company has cash and investments worth $145 million--$90 million of which is in cash and short-term investments.

Handspring has been making efforts to streamline spending and in the current quarter expects operating expenses to be down to $31 million, or 8 percent lower than in its first quarter.

The company has also been cutting prices on various Visor models to keep up with moves from rivals such as Palm and Sony. On Monday, Handspring announced a new line called Treo that incorporates organizer functions and cell phone capabilities. The devices are not expected to be available until early next year, so they won't affect the current quarter's earnings.

"In many ways, the Treo communicators remind us of the launch of the PalmPilot--a small innovative product with surprising functionality that everyone is instantly attracted to," Handspring Chief Product Officer Jeff Hawkins said during the call.

Chief Operating Officer Ed Colligan added that the company announced the Treo devices months before their release for three reasons:

• It takes time to educate wireless network carriers about marketing the devices to consumers.

• The Treo devices don't significantly cannibalize other Handspring products.

• The company needed to test the devices with carriers and was concerned that details would leak out without allowing Handspring to market the device in the way it wanted.

Despite its efforts to keep the information under wraps, CNET had made details of the products public in August--weeks before Handspring's official announcement Monday.