Feeds

Palm to axe 250 jobs as it dips into the red

Desperate cost cutting to offset zero sales growth

  • alert
  • submit to reddit

Secure remote control for conventional and virtual desktops

Palm posted its latest financials last night, and while its revenues continue to grow - up 73 per cent year on year - they haven't kept its profits up - quite the reverse - or convinced the company that the outlook for the rest of the year is as rosy as it has been.

Indeed, the PDA pioneer is sufficiently worried about growth though 2001 that it's going to cut 250 full-time jobs and contract workers in a bid to cut costs.

So, for the three months to 2 March - Palm's third quarter of fiscal 2001 - the company reported revenues of $470.8 million, up from Q3 2000's $272.3 million.

Operationally, the company made profits of $9.3 million (two cents a share), but factor in exceptional items and the figure drops to a $1.9 million (break-even on an earnings-per-share basis). This time last year, Palm recognised earnings of $15.8 million (three cents a share) before one-offs and $11.0 million once they were taken into account.

Hitting the latest-completed quarter's earnings were the cost of rebating buyers of Palm's PDAs. Palm refused to recognise this cost last quarter - provoking not a little criticism of its accounting practices because it presented an arguably inaccurate picture of that quarter's earnings. Instead, Palm chose to take the hit this quarter, a traditionally poor-performing one.

Palm also took a hit from its acquisition of WeSync, part of its plan to take its HotSync technology to the Web, to free the PDA from the need to be regularly connected to a host PC. Palm's enterprise drive also saw the proposed acquisition of Extended Systems, but that's not due to be completed until June, so won't impact Palm's earnings until Q1 2002.

That said, Q4 isn't looking too healthy, either. Palm is predicting zero year-on-year growth for the period, with revenues set to come in at around $300-315 million, a quarter-on-quarter fall of over 36 per cent. That's a significant dip, and marks a major shift from Palm's bullish messages last quarter.

That's expected to lead to a loss of eight cents a quarter, driven by a $160-165 million marketing spend to drive sales of its recently released but not yet shipping (ie. not revenue earning) high-end m500 and m505 PDAs.

These are key to Palm's attempt to win back sales at the high margin end of the business, which has been hit by low-cost PDAs from Handspring and Palm's own consumer-oriented m100.

The success of Compaq's iPaq PDA hasn't helped matters either. Sales of this devices have grown significantly over the last three months, so expect Palm to promote the m505 vigorously. With its colour screen and shiny silver shell, seems designed to take the iPaq on head-to-head.

To help pay for all this, Palm will axe 250 full-time jobs and contract workers. Again, that's going to hit the company's Q4 bottom line, but it should contribute to the 10-15 per cent cut in costs it's hoping to realise in Q1 2002. Palm is also exploring flogging off real estate assets. ®

Related Stories

Sharp to beat Palm with Linux, Java - official
Recession to halve PDA market growth
Handspring toys with Palm alternatives

Secure remote control for conventional and virtual desktops

More from The Register

next story
The 'fun-nification' of computer education – good idea?
Compulsory code schools, luvvies love it, but what about Maths and Physics?
Ex-US Navy fighter pilot MIT prof: Drones beat humans - I should know
'Missy' Cummings on UAVs, smartcars and dying from boredom
Facebook, Apple: LADIES! Why not FREEZE your EGGS? It's on the company!
No biological clockwatching when you work in Silicon Valley
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
'Cowardly, venomous trolls' threatened with TWO-YEAR sentences for menacing posts
UK government: 'Taking a stand against a baying cyber-mob'
Sysadmin with EBOLA? Gartner's issued advice to debug your biz
Start hoarding cleaning supplies, analyst firm says, and assume your team will scatter
Doctor Who's Flatline: Cool monsters, yes, but utterly limp subplots
We know what the Doctor does, stop going on about it already
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Cloud and hybrid-cloud data protection for VMware
Learn how quick and easy it is to configure backups and perform restores for VMware environments.
Three 1TB solid state scorchers up for grabs
Big SSDs can be expensive but think big and think free because you could be the lucky winner of one of three 1TB Samsung SSD 840 EVO drives that we’re giving away worth over £300 apiece.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.