More Palm layoffs at hand

Struggling with slow sales and intense competition, the handheld device maker is expected to announce significant layoffs as soon as next week.

Richard Shim Staff Writer, CNET News.com
Richard Shim
writes about gadgets big and small.
Richard Shim
2 min read
Struggling with slow sales and intense competition, handheld device maker Palm is expected to announce significant layoffs as soon as next week.

A source close to the company said the exact number of jobs to be cut and the timing of the announcement will be influenced by sales during the crucial last two weeks of November, which marks the end of the company's fiscal second quarter. Other sources said Palm executives are considering cuts of 300 to 400 workers.

A Palm spokeswoman declined to comment.

The layoffs would mark the third round of significant cuts at the company this year, which has been tough for the technology industry and especially for Palm.

During the first half of the year, Palm laid off about 500 employees in two rounds of cuts. As of July 27, the company had 1,311 employees, according to a Securities and Exchange Commission filing.

Palm cut more than a dozen jobs in Cambridge, Mass., earlier this month.

The company remains the market leader in two key categories: devices sold and handheld operating system market share. However, an inventory glut and slowing sales have stalled growth for the once high-flying 3Com spinoff.

Palm is in the process of separating its operating system business from its hardware business in an effort to spin off the OS business as its own company--a process that it will start in January.

Adding to the woes, several key executives have left the company, including former Chief Technology Officer Bill Maggs; the former general manager of its Platform Solutions group, Alan Kessler; and, most recently, former CEO Carl Yankowski.

Eric Benhamou, the chairman of Palm and 3Com, is serving as Palm's interim CEO and is part of an executive council that is searching for a new chief executive.

The recent turmoil at the company marks a sharp reversal of its fortunes earlier this year, when sales were surging. But the economic slowdown, increased competition, and the ill-timed launch of the company's m500 and m505 devices slowed sales and created an inventory glut.

Delays in wireless handhelds and other products, such as a Bluetooth Secure Digital networking card, also led industry watchers to wonder whether the company has lost its ability to innovate and lead the market.

"The company has given the impression that it's grown paralyzed and complacent," IDC analyst Kevin Burden said.

Meanwhile, competitors Handspring and Sony are stepping into the limelight with new products. Handspring, for example, has developed a combination handheld and cell phone device called Treo that is slated for a January release. Some Sony handhelds include built-in MP3 players and remote controls.

The three companies also are embroiled in a price war that has hurt revenue.

Palm shares slipped 42 cents Tuesday to close at $3.45, well below their 52-week high of $57.56.