Palm Inc. watched its stock drop more than 20 percent after the company released its earnings with the news that it will not make profitability by the second quarter and that it is postponing the launch of its anticipated integrated wireless device.
“We simply thought this wasn’t the optimal time to launch the product,” said Palm Chief Executive Officer Carl Yankowski, citing the wavering economy and the Sept. 11 terrorist attacks.
Palm’s stock dropped from about $2.40 to about $1.70 per share Friday, a new all-time low for the company.
Tom Sepenzis, an executive director at CIBC World Markets, said Palm’s move to delay the release of its wireless device was understandable since most businesses are tightening their purse strings in response to the weakening economy.
“Realistically, the market is shifting down right now,” he said. “The market itself is just not supporting them (Palm) right now.”
However, Sepenzis said, Palm will lose a major advantage by not releasing the device as soon as possible. He said the industry will likely continue to view Palm products as outdated.
Releasing a new integrated wireless device “would have put them back ahead of the pack,” he said.
Palm has not released any official information on the integrated wireless device. However, information on the company’s i705 was briefly released on the Federal Communications Commission’s Web site through an apparent filing mishap early this month. According to the FCC’s information, the i705 will feature a Secure Digital expansion slot, a universal connector for add-ons and syncing, and a built-in antenna for always-on access to corporate e-mail.
Instead of releasing an advanced wireless device, Palm is looking to fill out its device portfolio. Along with last week’s earnings release, Palm also unveiled its new m125 handheld, which is aimed at first-time buyers, educators and students. The device features a 33 MHz processor, 8MB of RAM and will go for about $250.
Palm’s Yankowski also announced the company would not reach profitability by the second quarter, and he refused to offer a new date.
“We are still striving toward profitability as soon as possible,” he said. “However, we now do not expect to attain this goal in Q2.”
In its quarter, ended Aug. 31, Palm took a loss of $38.7 million, or seven cents per share. The company’s revenues fell 47 percent, from last year’s $401 million to $214.3 million. However, the company did manage to increase its revenues 30 percent from the $165.3 million it posted in the fourth quarter of fiscal 2001.
“While there is much yet to do, we made significant progress on key operational goals in the quarter despite continuing worldwide economic uncertainty and growing competition,” Yankowski said.
