Palm Turns a Profit but Revenue Slides

MILPITAS, Calif. -- Palm Inc., the world’s largest maker of hand-held computers, on Wednesday reported a second-quarter net income of $3.52 million as it cut costs to achieve its second profit in two years, even as sales fell.

Earnings were 12 cents a share compared with a loss of $25.2 million, or 89 cents, a year earlier, the company said. Shares rose 13% on the news, even though sales fell 8.8% to $264.9 million in the quarter ended Nov. 29 from $290.6 million a year before.

Palm lowered marketing and other expenses, as rivals including Handspring Inc., Hewlett-Packard Co. and Sony Corp. capture a greater share of the dwindling market for hand-held computers. Palm has tried to boost sales with higher-priced models aimed at businesses and the $99 Zire, a machine targeted at first-time users.

“The hand-held industry is declining less rapidly now than it has over the last several quarters,” Eric Benhamou, Palm’s chairman and chief executive, said in a conference call.

Palm is seeing “strong acceptance” of its new products during holiday sales, Benhamou said.

Palm shares rose $2.12 to $18.85 in after-hours trading after the results were released. The shares fell 52 cents to $16.73 in Nasdaq trading.

The computer maker’s results exceeded the company’s earlier expectations. In September, Palm said it would have a “small loss” on sales of $245 million to $265 million for the quarter.

The results have been adjusted to reflect a reduction in the number of shares outstanding from a reverse stock split approved in October. Investors received one share for every 20 they owned.

Palm’s stock market value, which exceeded that of Ford Motor Co. on the first day of trading in March 2000, has declined by more than $15 billion over the last two years, standing at $485 million by the close of the regular trading day.