Want CNET to notify you of price drops and the latest stories?

Palm beats 1Q estimates

2 min read

Palm (Nasdaq: PALM) doubled the consensus earnings estimate in the first quarter and reiterated its expectation of roughly $2 billion in annual revenue.

After market close Monday, the maker of the popular Palm Pilot hand-held computers reported fiscal first quarter net income of $23.9 million, or 4 cents per share, excluding special charges. First Call's survey of a dozen analysts predicted a profit of 2 cents per share for the quarter ended Sept. 1.

Including amortization and acquisition-related charges, Palm earned $17.3 million, or 3 cents per share.

Shares of Palm slid to 51 in afterhours activity on the Island electronic communications network, immediately following the release of quarterly results. Palm stock closed Monday's regular trading at 52 1/4, up 7/16 for the session.

Company executives reiterated earlier financial targets of $1.9 billion to $2 billion in revenue for the fiscal year. Revenue for Palm's historically weak third quarter will be down from the first, CFO Judy Bruner said during a conference call with analysts.

Certain parts continue to be in tight supply, including two types of integrated circuits, Bruner said. "Demand for our products has continued to exceed our ability to supply product," she said.

The company doesn't expect component supplies to meet demand until the late third quarter at the earliest. However, the company's financial guidance takes the parts situation into account, Bruner said.

First quarter revenue rose to $401 million, a 127 percent gain year-over-year and 14 percent increase from the fourth quarter. The company shipped about 1.5 million units in the first quarter.

Most of Palm's first quarter revenue came from $389.3 million in sales of devices, accessories and related services. Revenue from licensing the Palm OS to other companies was $4.6 million, a 33 percent sequential gain. For the first time, Palm reported content and access revenue, which totaled $7.1 million.

Palm's latest offerings are selling well, especially the m100 device, executives said. Although the m100 wasn't available for the first two months of the quarter, it generated more than 10 percent of the company's unit sales, Bruner said, during a conference call with analysts.

Average prices for Palm devices fell to $240 from $265 in the first quarter. The drop was expected, Bruner said, because of the m100, which is priced cheaper to appeal to a wider audience.

The company now has more than 100,000 registered software developers, Yankowski said. About two-thirds of them are working on business applications, he added.

Also Monday, Palm said it would build a 500,000-square-foot headquarters in San Jose, Calif. Palm has set aside about $220 million in government bonds as collateral for a one-year lease of the 39-acre site, and plans to sign a seven-year lease in the second quarter.

In other Palm news, the company unveiled a deal to develop wireless phones with Motorola (NYSE: MOT).>