Update: Palm beats lowered expectations for Q4; 3Com doesn't

Palm Inc. Tuesday reported fourth-quarter revenue of $165.3 million, with a pro forma net loss of $89.2 million, or 16 cents per share, edging past both its own guidance and analyst estimates.

Analysts polled by Boston-based First Call/Thomson Financial had predicted that the handheld vendor would lose 19 cents per share for the period, which ended June 1. The revenue figure is significantly down from a year ago, when Palm reported fourth-quarter sales of $350.3 million and pro forma net income of $17.2 million.

Volume shipment of Palm's m500 series and close collaboration with channel partners helped spur end-user demand, resulting in an overall reduction in channel inventory during the quarter, the company said. That put the Santa Clara, Calif.-based company on track to turn a profit again in the second quarter of the new fiscal year, Carl Yankowski, Palm's CEO said in a conference call with press and analysts.

Palm shipped 681,000 devices during the quarter, down from 1.8 million in the fourth quarter of last year, Judy Bruner, Palm's chief financial officer, said during the call-in.

Palm is "cautiously optimistic" about the current quarter, when it expects to report revenue of $200 million to $220 million, she said. In its fiscal second quarter, revenue is expected to increase to between $420 million and $440 million, Bruner added.

"This has been a demanding quarter for Palm, our shareholders and our employees," Yankowski said. "We entered the quarter knowing that the slowing economy would affect the handheld computing market on the eve of the largest product transition in Palm's history."

Earlier this month, Palm announced plans to lay off an undisclosed number of workers due in part to the earlier delay in the release of its newest handheld devices (see story).

Palm also reported charges totaling $436.5 million for the quarter. They were an excess inventory charge, a restructuring charge and an asset impairment charge.

The restructuring charge, which was for $60.9 million, related mainly to real estate costs, including halting construction on the corporate campus Palm had planned to build in San Jose. The severance charges were related to the elimination of 500 employees, the company said.

Palm also reported inventory and related costs of $268.9 million relating to the write-off of components, work in progress and finished goods that Palm doesn't expect to sell. The company previously estimated this amount would be $300 million.

Taking into account all of these charges, the company reported an actual net loss for the fourth quarter of $392.1 million or 69 cents per share. That's down from net income of $12.4 million or 2 cents per share for the year-earlier quarter.

Struggling networking equipment maker 3Com Corp. also reported its financial results, with officials saying the company has been hit by the most far reaching slowdown ever faced by the technology sector.

The Santa Clara-based vendor reported $468 million in revenue for the quarter ending June 1, down from $763.7 million in the same period last year. 3Com posted a net loss for the quarter of $206 million, or 61 cents per share. Analysts polled by First Call/Thomson Financial had expected a loss of 57 cents per share.

In response to the economic slowdown, 3Com early last month announced that it planned to lay off 3,000 employees, or about 30% of its workforce (see story).

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