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Palm's new headquarters kaput

The handheld maker plans to sell the land in San Jose, Calif., it had intended for a new corporate headquarters.

Handheld maker Palm will sell the land in San Jose, Calif., it had intended for a new corporate headquarters, the company said late Friday.

The company had originally set aside about $238 million in restricted funds as collateral to build the new headquarters. However, when Palm reported disappointing fiscal third-quarter earnings in late March, it postponed plans to start construction. Since then, its financial picture has only gotten worse.

The company will use the proceeds from the sale as working capital for operations.

According to a Securities and Exchange Commission filing Friday, the company exercised its option to purchase the 39 acres of land on May 31.

The Santa Clara, Calif.-based company has hired a broker and plans to sell the land, Palm spokeswoman Julia Rodriguez said. "We're looking in the direction of selling the land because it's the only way to convert the land into cash."

Financial analysts have voiced concern that the company is burning through its cash too quickly. Earlier this week at a Bear Stearns conference in New York, Palm CEO Carl Yankowski insisted that the company will not run out of cash and added that no one has approached him regarding the acquisition of the company.

Yankowski did say that separating the hardware and software portions of Palm's business is a possibility.

Palm paid Societe Generale Financial $216 million for the land and $3 million for extension payments closing costs and land improvement costs. Another $19.8 million was for interest and related transaction costs, according to the SEC filing.