Palm 2nd-Quarter Loss Is Smaller Than Expected

Palm Inc., the struggling manufacturer of hand-held computers, reported a smaller-than-expected fiscal second-quarter loss Wednesday after sales plunged 44% from the same period last year.

The Santa Clara, Calif.-based company lost $25.2 million, or 4 cents a share, in the three months ended Nov. 30. A year earlier, the company posted a profit of $20.3million, or 4 cents a share. Although it fell by nearly half, revenue was higher than analysts expected: $290.6 million, up 36% from the first quarter.

Interim Chairman and Chief Executive Eric Benhamou said it has been a particularly difficult year for the company, which has seen declining sales because of weakening demand and competition from Microsoft Corp.’s Pocket PC.

Benhamou said the company will introduce several wireless products next year, including hand-held computers with Internet access and e-mail.

But some analysts said the new gadgets may be too little, too late, noting that Handspring Inc., one of Palm’s primary competitors, is rolling out a hand-held computer equipped with a cell phone.

Palm “is still lagging,” said Thomas Sepenzis, an analyst with CIBC World Markets.

Revenue for its third quarter ending in February will be $250 million to $260 million, said Palm Chief Financial Officer Judy Bruner. That’s down from the company’s prior target of $290 million but up from Wall Street estimates of $219 million. Bruner projected fiscal fourth-quarter revenue would be $290 million to $300 million. Analysts don’t expect Palm to return to profitability until 2003.

Palm shares rose 13 cents to close at $3.32 on Nasdaq.

Meanwhile, Handspring raised $48.5 million Wednesday, most of it in a second public offering. The company sold 7 million shares at $5.50 each, raising $38.5 million. Qualcomm Inc., which licenses patents for a technical standard used in 96 million mobile phones, bought 1.84 million shares from Handspring for $10 million, or about $5.44 each. The shares were sold at a discount to Tuesday’s close of $6.12.

*

Bloomberg News was used in compiling this report.