Handspring halves Q4 sales expectations

Price war, demand decline to blame

PDA maker Handspring halved its quarterly sales forecast yesterday, a sign that Palm's woes are not entirely of its own making.

Handspring said it now expects to make between $60 million and $65 million for the quarter, the fourth of the company's current fiscal year. That's significantly down on Q3's $123.8 million and the $136 million it had originally forecast for Q4. First Call's poll of Wall Street shows analysts were expecting only a dip of $500,000.

To blame, the company says, are the price cuts it has been forced to make following Palm's reductions, designed to help erode its mountain of unsold older models. Handspring also noted a severe drop in customer demand over the last couple of months.

Palm only has itself to blame for screwing up its transition from the older Palm Vx PDA to the new, flash m500 and m505, by announcing the latter and then not shipping them for months. However, the dramatic fall in demand that Handspring notes is surely a broader problem. Corporate IT belt-tightening is the likely cause. Palm's decision to back away from its planned merger with corporate PDA integration specialist Extended Systems - and Extended's subsequent job cuts - point to that.

It certainly explains Handspring's recent attempt to flog off kit to developers by offering a 15 per cent discount on its high-end models.

It's also the motivation behind Handspring's $100 rebate on its Visor Edge product offered to US-based owners of older PDAs. When it even makes the offer to folk with dusty old unused Apple Newton MessagePads tucked away in cupboards, you know times are hard. ®

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