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Handspring fires 40 as revenues plunge 50%

Palm price war hammers quarter-on-quarter growth

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PDA maker Handspring will rid itself of 40 employees in a bid to cut costs following a "challenging" quarter, the fourth of its current financial year, details of which it posted yesterday.

Revenue for the three months to 30 June totalled $61 million, lauded by Handspring as an 18 per cent increase on the same period last year. True, but it's also less than half of the $123.8 million the company recorded last quarter.

The problem? Falling consumer demand and the effect of Palm's aggressive price cuts aimed at ridding itself of its own inventory build-up. When your main rival is offloading warehouses full of unsold kit, it makes it a lot harder to sell your own product, as Handspring has learned to its cost.

Indeed, inventory write-offs of its own drove Handspring's quarterly loss of $32.4 million up by a further $26.8 million. Amortisation of deferred stock compensation and intangibles added a further $7.9 million to the final figure of $67.2 million. That's significantly higher than Q4 2000's loss of $19.5 million, despite the year-on-year revenue growth.

To get the company back on track, CEO Donna Dubinsky announced a cost reduction programme centering on the elimination of 40 jobs, around nine per cent of Handspring's workforce, cutting back on the company's marketing efforts and putting off a plan to expand its HQ.

The goal, said Dubinsky, is to get into profit by the end of fiscal 2002. She wants the company's PDA operation to become profitable sooner than that, by the second quarter. The company will increasingly focus on wireless comms as a key driver for PDA sales.

·For all of fiscal 2001, Handspring's revenues totalled $370.9 million, up 264 per cent on the $101.9 million it recorded last year. Its annual loss came to $54.1 million, but factor in one-off items and other charges, and the figure rises to $126 million, more than double the $60.3 million Handspring lost during fiscal 2000. ®

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