Even though it's the leading provider of personal data appliances for the high-tech market, the ailing economy has taken a toll on Palm Inc., which Tuesday reported a net loss of $1.9 million for the third quarter of 2001, or 0 cents per share, and warned that it expects to report a net loss of about 8 cents per share in the fourth quarter.
As a result, Palm CEO Carl Yankowski said the company will lay off 250 employees, or 10% to 15% of its staff. It will also halt plans to build a new corporate headquarters in San Jose, Calif. "The sudden change in the economic climate has been jarring to us," Yankowski said in a statement. "But not withstanding the current economic slowdown, I remain bullish on our future. We have market and mindshare in the early stages of the handheld market, and we have the world's No. 1 handheld OS."
Palm reported revenue of $470.8 million for its third quarter, ended March 2, a 73% increase from the $272.3 million generated in the third quarter of fiscal 2000. Pro forma net income was $9.3 million, or 2 cents per share for the third fiscal quarter of 2001, compared with pro forma net income of $15.8 million, or 3 cents per share, for the third quarter of fiscal 2000. Net income for the same quarter last year was $11 million.
Shipments of Palm handhelds during the third quarter rose 112% over the same period a year ago to 2.1 million units, bringing the total number of handheld devices shipped by Palm to nearly 13 million to date.
Yankowski attributed the third-quarter loss to the economic slowdown and to the acquisition of wireless synchronization company WeSync Inc. and an agreement to acquire Extended Systems Inc. for wireless enterprise access technology.
Palm shares opened at $8.75 Wednesday after closing at $15.50 Tuesday before the third-quarter loss was reported. Palm's bad news seemed to affect its rivals, too, as shares of Psion PLC and Handspring Inc. fell during early trading Wednesday.