SUNNYVALE, Calif.—Palm Inc. shares were up more than 3 percent on the heels of the company’s first-quarter earnings report, a grab-bag of news on the company’s fortunes.
The report included an uptick in revenue, depressed profit and a near-term strategy of foregoing profit in favor of increased revenue and market-share building.
The Treo and PDA vendor posted revenue of $355.8 million for the quarter ending Sept. 1, slightly above analysts’ expectations and up 4 percent over the year-ago quarter. The company had warned earlier this month that revenue would fall short on slow sales of its Treo devices. Net income for the quarter was $16.5 million, a figure that reflected the first time Palm included expenses for stock options for employees. That was down from $18.2 million in the year-ago quarter.
The company’s guidance—which was limited to the second-quarter due to “dynamic market conditions,” the company said—reflected a strategy of emphasizing revenue and market share development over profits. The numbers did not please Wall Street analysts, however; Palm forecast revenue between $430 million and $450 million, in contrast to Wall Street expectations of $472 million. The company did not reaffirm earlier, long-term guidance for the rest of the fiscal year.
Palm’s second-quarter strategy includes expanding its geographic reach, particularly in Europe, and launching a lower-priced Treo during the holiday season to meet the competitive challenge from Research In Motion Ltd., Nokia Corp. and Motorola Inc.—all of which have recently launched devices that combine productivity and multimedia features at a price point designed to make consumers swoon and buy.
Analysts have expressed concern that as Nokia and Motorola take aim at RIM, Palm would suffer—a forecast that finds some basis in the company’s mixed first-quarter results.
