June 30, 1999 8:55 PM PDT

Rex losses sink Franklin earnings

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Franklin Electronic Publishers, manufacturer of the Rex personal organizer and the Rocket eBook, reported losses of over $30 million for the fiscal year and indicated that future product development is in jeopardy.

Franklin lost $3.81 per share for the year ending March 31, or $30,191,000. The results also lead to defaults on outstanding loans, the company added.

The company laid the blame for its losses squarely at the feet of Rex and Rocket eBook, two products which have so far failed to deliver on the buzz which accompanied their arrival. (See related story)

Franklin's Rex electronic organizer initially garnered attention for its slim design--it is roughly the size of a credit card--and its low price. But Palm Computing has dominated the handheld market over the last few years, and given up ground only to software giant Microsoft and its Windows CE devices.

Although a variation of the Rex can still be seen in Motorola's popular high-end StarTac cell phones, the device itself has largely been relegated to the bargain bins.

Rex revenues rose from $10,152,000 last fiscal year to $15,673,000, but the company's overall earnings declined by $35 million. At least half of the decline in earnings can be attributed to the Rex, according to the company.

As for the Rocket eBook, which displays content from books and newspapers on an electronic tablet, Franklin admits sales have been "disappointing."

The company is evaluating the future of each product. Franklin may not have adequate financing to continue releasing new products, or even market the products, the company said in its earnings statement.

In addition, Franklin warned it will report a "substantial" loss for its June quarter, because of low sales, inventory, expense write-offs, and other charges associated with company-wide restructuring. The company will improve its earnings for the second half of the year, it said.

Franklin is evaluating its strategies and conducting a review of its operations. Based on improved sales of its electronic Rolodex product and layoffs of 15 percent of its employees in the first quarter, the company predicts it will return to profitability by the end of the year.


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