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Palm's earnings slide

Diversifying into 2007?

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Palm this week reported revenue and profits lower than a year ago. The smartphone and PDA manufacturer grossed $392.9m in Q2 2007, down from $446.3m a year ago.

However, the intense competition in the communicator business was reflected in a profits squeeze: Palm reported $12.8m net income ($17.6m non-GAAP) for the quarter - down from $24.4m (non-GAAP) a year ago.

R&D expenditure rose from $31.2m a year ago to $42.2m in the period ending 1 December.

In September, Palm warned the markets that its Q1 revenues would come in lower than expected. At $355.8m, gross revenue was lower than the $380m to $385m range Palm had previously forecast.

Since then, Palm has rolled out the consumer-focused Treo 680p (reviewed here), shipped the Windows-based 750v (review) on Vodafone's network in nine countries, and bought back control of the original PalmOS.

In all, Palm moved 617,000 Treos, up 42 per cent from a year ago. Last year, however, Palm had just refreshed its flagship PDA in the shape of the new T|X model. It hasn't touched the line since, however, and this year was the first Holiday shopping season in a decade without a new Palm PDA model on the shelves. PDAs may be near-invisible in retail, but continue to generate 28 per cent of Palm's revenue.

Things look set to change in 2007, however, with Palm CEO Ed Colligan speaking about "diversification" and "new services". Palm has been hiring client/server developers for what's rumoured to be a new information device - perhaps in tablet form factor.

There's little margin for error. Palm finished Q2 2007 with half a billion dollars in the bank in ready cash, and a quarter of a billion in money owed by customers. ®

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