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Palm Loss Widens on Slow Demand

Technology: The hand-held computer maker says it will unveil three new products for the holiday season.


Struggling hand-held computer maker Palm Inc. reported Monday that its first-quarter loss widened eightfold as sales fell 20% from a year ago.

The Milpitas, Calif.-based company said its net loss was $258.7 million, or 45 cents a share, in the three months that ended Aug 30. That compares with a loss of $32.4 million, or 6 cents a share, last year. Sales dropped to $172.3 million from $214.3 million.

"The market continues to be difficult," Chief Executive Eric Benhamou said in a conference call with analysts. "It is worse today than we predicted a few months ago."

Excluding one-time expenses such as restructuring charges, Palm said its net loss would have been $36.4 million, or 6 cents a share. On that basis, analysts had expected the company to report a loss of nearly 8 cents a share, according to a survey by Thomson First Call.

"The revenue was a little lighter than expected but earnings were a little higher," said analyst Joseph To of Lehman Bros., which does not own Palm shares or do business with the company.

Palm shares gained 3 cents to 76 cents on Nasdaq. The results were announced after the close of trading.

The big test for Palm will come over the next few months as it introduces three new products: a low-end organizer to sell for about $100, a high-end organizer and an organizer-cell phone, To said.

"The major questions are: How do they manage this product transition, how will the products do during and after the Christmas shopping season and when does the company get to profitability?" To said.

Benhamou said Palm would achieve operating profit next quarter. No prediction was made on net profit. Palm has had losses in five of the last six quarters and its share price has dropped 60% in the last year. Last month, the firm was removed from the Standard & Poor's index of the 500 biggest U.S. companies.

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