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Palm's revenues rise 29.6%

But PDA shipments grew by only 7%

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Updated Palm's attempt to revive its fortunes took a big step forward last quarter, the first of its current fiscal year (2002), but it still has a long way to go.

For the three months to 31 August, the PDA pioneer achieved revenues of $214.3 million, well down (47 per cent) on the $401 million it reported this time last year, but comfortingly 29.6 per cent up on the $165.3 million it posted for Q4 2001.

The sequential increase isn't perhaps as much as the company's fans and watchers would have liked, but it's in line with Palm's own expectations.

It's certainly no cause for complacency. Palm says it shipped around 750,000 PDAs during Q1, which is only seven per cent up on last quarter's shipment figure of 700,000, and still very much less than the 2.1 million devices it said it had shipped in the three months to 31 May.

Palm's revenue hike has clearly come through a greater proportion of high-end devices - the m50x family - rather than significant growth in sales per se. That suggests that Palm's colour m505 is indeed proving popular, now that the company is shipping the product in volume, but there's no real sign of recovery in the market.

Palm's new m125, which brings many of the m50x series' features to the company's consumer line, may help revive shipments at the low end by tapping into the back-to-school demand during the current quarter. Palm launched the m125 yesterday, ahead of its results announcement.

Only by driving up unit sales will Palm return to profitability. Palm lost $38.7 million this past quarter, rather better than $89.2 million it lost last quarter. During Q1 2001, however, it reported a profit of $17.3 million.

Those figures exclude one-off gains and charges. Factor them in, and Palm lost $32.4 million.

Looking beyond the current quarter, Palm will no doubt be hoping for further shipment increases in the Christmas quarter, and we expect that the m505 will continue to increase its share of Palm's overall shipments. Colour displays are clearly what the public want, particularly given the relatively small difference in price between monochrome and colour models. It's a shame that the m125 didn't ship with a colour display, but cost aside, Palm probably wants to focus demand for colour on the m505.

The upcoming wireless i705, meanwhile, will hopefully tap into increased interest in mobile Net access, though not this year. "With uncertainty [about] Christmas and consumers and after the terrorist attacks, we simply thought this wasn't the optimal time launch the product," said CEO Carl Yankowski during a analyst conference last night. "So we are focusing our marketing dollars [on existing PDAs] as opposed to deluding ourselves with the launch of another product."

Whatever its merits and failings as a platform, PocketPC has defined the 'ideal' base spec. for a handheld as a colour screen, plenty of memory and multimedia-capable. Palm has to follow that if it wants to maintain its marketshare lead. Palm knows this, hence its adoption of the ARM processor platform - "We are moving aggressively to an ARM-based operating system that will be backwards compatible with existing applications," promised new recruit CTO David Nagel - but Sony, for one, is doing it now, and it will be interesting to see how successful the Clié PEG-N760c is over the coming months.

If Palm OS licensees continue to out-innovate Palm itself, that should hasten the spinning off of the company's Platform Solutions Group - the guys who develop the OS. Palm has promised to set it up as a semi-independent subsidiary by the end of the financial year. ®

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