Palm Reports Fiscal Results, Insight Into Future Products

Palm today reported a third-quarter net loss of $31.5 million, or 30 cents a share. Palm Centro smartphone sell-through reached a company high, totalling 833,000 units. "Centro is off to the strongest start of any smartphone in Palm’s history," said Ed Colligan, Palm president and chief executive officer. Palm executives offered insight into future Treos and the upcoming OS. "Those products aren’t coming out this quarter," said Colligan when asked about the release of new Treo smartphones during the upcoming fiscal quarter. Colligan did reaffirm that the company is on track to deliver their next generation operating system by the end of the calendar year.

The company expects the "first half fiscal 09 to be a turning point in the business". The company plans to continue to expand Centro distribution globally, expecting Centro growth to help offset declining growth in Treos. When asked about the Centro in the US, Colligan acknowledged "opportunities" exist with other carriers. With the new operating system will bring new Treo devices. While Palm typically does not comment about new devices, company executives are "excited about designs on the table." New Windows Mobile Treo products targeted to higher end enterprise business are expected this year. While the new operating system might be completed by the end of 2008, it wasn’t clear if products running the new OS would be available, with the possibility of new Treo devices not hitting shelves until 2009.

Earnings Details

Net loss applicable to common shareholders for the quarter was $31.5 million, or $(0.30) per diluted share. Net loss included stock-based compensation expense of $6.2 million, amortization of intangible assets of $1.0 million, restructuring charges of $12.3 million and accretion of series B convertible preferred stock of $2.4 million. This compares to net income for the third quarter of fiscal year 2007 of $11.8 million, or $0.11 per diluted share.

Net loss applicable to common shareholders in the third fiscal quarter, measured on a non-GAAP(1) basis, totaled $17.0 million, or $(0.16) per diluted share, excluding stock-based compensation expense, amortization of intangible assets, restructuring charges and accretion of series B convertible preferred stock and adjusting the related income tax provision to 26 percent. This compares to non-GAAP net income in the third quarter of fiscal year 2007 of $16.5 million, or $0.16 per diluted share, which excluded the effects of stock-based compensation, amortization of intangible assets, an in-process research and development charge and adjusting the income tax provision to 40 percent.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, totaled negative $28.4 million. EBITDA, adjusted to add back stock-based compensation, other non-operating expense and restructuring charges, or Adjusted EBITDA, totaled negative $9.5 million.

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