Palm reports loss, names hardware CEO
Reflecting a sharp drop in demand, the handheld maker posts a loss of $27 million for its fourth quarter, on revenue of $233 million. It also promotes Todd Bradley to hardware CEO.
The sales figure is in line with the company's warning in May but far short of the $290 million to $300 million the company had originally told financial analysts to expect. The figure is also up 41 percent from the $165 million in revenue the company took in during the fourth quarter of the prior year.
Palm also named Todd Bradley, president of its hardware unit, as that group's CEO. As first reported by CNET News.com, the move means the company for now will have three chief executives: David Nagel serves as CEO of PalmSource, the operating system unit, while Eric Benhamou is CEO of the overall company.
The company plans to split itself in two later this year. Benhamou's position as CEO of Palm will be eliminated once the two units are operating as completely separate companies. He will remain chairman of both units.
Excluding certain charges and benefits, Palm lost $18 million, or 3 cents per share, for the fourth quarter of fiscal 2002. This compares with a pro forma net loss of $89 million, or 16 cents per share, for the fourth quarter of fiscal 2001.
"Palm executed quite well in a down market," Palm interim CEO Eric Benhamou said in a statement. "Over the quarter, our pro forma gross margins grew to nearly 35 percent, we generated positive cash flow from operations, and channel inventory remained within our desired range."
Palm said it shipped 900,000 handhelds in the quarter and 4.4 million for the full fiscal year, which ended May 31.
The handheld maker is suffering through a second straight spring of lower-than-expected demand. Like Apple Computer and other consumer-oriented tech companies, Palm said that the "dads and grads" season--in which consumers typically buy gifts for Father's Day and graduation--never materialized.
Palm is trying to spur demand through promotions, such as a plan that gives a free m105 handheld to those that buy an m500.
The company said its PalmSource operating system unit accounted for $18.7 million in revenue, although $11.7 million of that came from Palm's hardware unit. The OS unit had an operating loss of $1.4 million, Palm said.
PalmSource, which already operates as a separate subsidiary, named its own board of directors Monday.
On a conference call with analysts, Chief Financial Officer Judy Bruner reiterated the financial outlook for the current quarter, with a projected operating loss of $40 million to $45 million on revenue of $175 million to $185 million.
For the full fiscal year, Bruner said she expects revenue of $1 billion, with the company reaching close to breakeven on an operating basis in its next quarter.
"We believe that demand will begin to grow again, perhaps approaching double-digit rates by next spring," Bruner said.
The company saw its cash balance increase by $11 million to $297 million during the past quarter, but it projects that its cash reserves will drop by more than $45 million in the current quarter.
"We do expect to use a sizable amount of cash in the current quarter," Bruner said, but she added that in subsequent quarters the company expects operations to produce anywhere from a $20 million gain to a $20 million drop in cash each quarter.
When asked whether a cash decline of between $50 million and $75 million for the current quarter would be a good estimate, Bruner said, "That would perhaps be a reasonable range."