March 22, 2004 3:46 PM PST

PalmOne loss narrows on strong Treo sales

Handheld maker PalmOne reported that rising demand for its combination cell phone and organizer device increased its revenue and narrowed its losses for the third quarter.

The Milpitas, Calif.-based company said Monday that sales for the quarter ended Feb. 28 came in at $242.5 million, compared with $197.9 million in the same period a year ago. The company reported a net loss of $9.3 million, or 20 cents a share, compared with a loss of $172.3 million, or $5.93 per share, a year ago.

Excluding restructuring charges of $4.5 million and amortization of intangible assets and stock-based compensation of $5.4 million, the company would have posted a net income of $600,000, or 1 cent per share, compared with a loss of $24.7 million, or 85 cents per share, a year ago.

"The strong results this quarter show that our strategy of delivering scale from the handheld product line, coupled with growth from the wireless product line, is working," PalmOne Chief Executive Todd Bradley said in a statement.

PalmOne has seen significant demand for its Treo device, a combination cell phone and organizer, which has helped improve the prospects of the company.

The company saw average selling prices of its handhelds increase from $169 to $233. PalmOne sold about 938,000 devices in the quarter, maintaining its No. 1 market share position in the handheld market.

The handheld maker had $190.6 million in cash and cash equivalents as of Feb. 28.

Bradley added during a conference call that while the handheld category declined, PalmOne's share of the market grew 11 percent.

The company's strategy is to continue to attract first-time buyers and to increase the number of major carriers supporting the Treo 600 device from six to 10 by the end of the calendar 2004, according to Bradley.

An industrywide shortage of displays for the Treo 600s may hold the company back, but PalmOne is looking for additional screen suppliers. PalmOne's chief financial officer, Judy Bruner, said that there would be higher sales for the device if the company could get more supply.

PalmOne gave revenue guidance of $245 million to $255 million for its current fourth quarter.

PalmOne shares closed down 70 cents, or 4.8 percent, to $13.48 in Monday trading on the Nasdaq. But the stock rose $1.78, or nearly 13 percent, to $15.62 in after-hours trading.

 

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