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Handspring warns of "softness"

The No. 2 handheld maker reports a quarterly loss that matches analyst estimates but says the current economic slowdown is affecting sales.

Handspring posted a fiscal third-quarter loss Thursday that matched Wall Street expectations, but also warned of "softness" in handheld computer sales.

"It is clear that the current economic slowdown is having some impact on near-term growth," CEO Donna Dubinsky said in a conference call.

Dubinsky said she sees a "softness in demand rather than a precipitous decline."

Handspring slightly trimmed its forecast for the coming quarters. The company reiterated that current quarter revenue will come in at $130 million to $136 million but added that it now expects sales will be in the low end of that range.

Sales may dip somewhat in the July-to-September quarter, the company added, and revenue during the calendar year may come in between $535 million and $560 million--5 percent below the company's prior forecast.

Main rival Palm made a series of price cuts Wednesday, but Dubinsky said she believes Handspring's models are priced appropriately and noted that many of Handspring's products are new. Still, Dubinsky said, Palm's inventory woes add a measure of uncertainty to the pricing market.

"To the extent we need to respond, we will," she said.

The No. 2 handheld maker will cut the rate at which it adds staff and will look to reduce other expenses in an effort to reach its goal of showing an operating profit by the quarter that ends in December, Dubinsky added.

Excluding extraordinary charges, Handspring reported a net loss of $6.7 million, or 6 cents per share, on revenue of $123.8 million for the quarter that ended March 31. In the same quarter a year ago, Handspring lost $4.5 million, or 13 cents per share, on revenue of $34.3 million.

A consensus of analysts expected Handspring to post a loss of 6 cents per share, according to First Call. Several analysts expected revenue of around $115 million.

Handspring's third-quarter sales were up 7 percent from the previous quarter, which included the holiday-shopping season.

Dubinsky said the company has a number of new products in the pipeline, including a handheld with integrated wireless capability that will debut by June 2002. She declined to offer more details.

The company is also looking to aim more of its products at corporate customers.

"We'll be evolving our products to better meet enterprise needs over the next 12 to 18 months," Dubinsky said.

Accounting for the effect of deferred stock compensation and intangibles, as well as a $12.2 million charge for the company's acquisition of Bluelark Systems, Handspring had a net loss for its third quarter of $27.2 million, or 26 cents per share.

Research In Motion reported better-than-expected results Wednesday, and co-CEO Jim Balsillie asserted that his company is not seeing a drop in handheld sales.

"This sector slowdown is mythical," Balsillie told CNET "We didn't see a slowdown in demand."