April 15, 2003 1:16 PM PDT

Financial slump slaps Handspring

Struggling device maker Handspring said its revenue fell and losses widened in the third quarter, as it continued to develop new products.

The Mountain View, Calif.-based company reported revenue of $30.8 million and a loss of $90.4 million, or 62 cents a share, for the quarter ended March 29. In the same period a year ago, the company had revenue of $59.7 million and a loss of $23.6 million, or 18 cents a share.

Excluding charges of $75.9 million for restructuring of its Sunnyvale, Calif., lease and $1.7 million for amortization of deferred stock compensation, Handspring's net loss for the quarter--tallied by other than Generally Accepted Accounting Principles--was $12.8 million, or 9 cents per share.

Analysts were expecting a loss of 9 cents per share, according to financial research firm First Call.

"We've continued to grow our Treo installed base through a difficult quarter, reaching 180,000 customers, while investing in a significant new product due this fall," Handspring CEO Donna Dubinsky stated in a release. "The near-term outlook will be challenging due to a weak economic environment and (to) lower-than-expected sell-in of current products for the coming quarter."

Handspring is pursuing additional funding through equity or debt offerings, said President Ed Colligan. As of March 29 it had unrestricted cash and short-term investments of $53.2 million, down $12.5 million from the previous quarter.

Handspring has enough cash to get through an upcoming product launch, CFO William Slakey said during a conference call. The company has 250 employees.

Handspring added that it has signed a deal with Orange to develop smart phones for the European network carrier. The new device will be "more towards the higher end of the line, moving more in the direction of a phone," said Dubinsky.

Handspring's relationship with Orange will be similar to its deal with Sprint, where the two companies worked to optimize the Treo 300, a combination cell phone and organizer, to run on Sprint's wireless network.

"We've had to make a sea change in our attitude in the last year and a half," said Colligan. Selling to carriers is "more like an enterprise sale."

The company expects organizer sales to be minimal as inventory is depleted. Revenue from communicator sales also will fall as the company reduces inventory in preparation of a new product launch.

Treo sales made up 69 percent of revenue from devices for the quarter, according to Dubinsky, who added that this is likely the last quarter that organizers will make a significant contribution to revenue.

In after-hours trading, Handspring shares were down 6 cents, or about 8 percent, to 67 cents.

 

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