Shares of Handspring Inc fell 18 percent on Tuesday on concern that sales for the money-losing maker of handheld computers will lag expectations, as demand remains weak amid the slowing economy.
Handspring shares, which have fallen for eight consecutive trading sessions, fell US$0.49 to US$2.21, after dropping to US$2.16, an all-time low. They have fallen 94 percent this year. Shares of rival Palm Inc fell US$0.21 to US$3.58 after reaching a new low of US$3.48.
Handspring last week slashed prices on most of its product line by as much as 25 percent, sparking concern that inventories are mounting as sales slow. Some investors are concerned that sales may not improve over the next few quarters, which could put the Mountain View, California-based company in jeopardy of bankruptcy, said Michael Kim, an analyst with Robertson Stephens.
"There's definitely concern that they are going to miss the quarter and may provide lower guidance for future quarters," said Kim, who rates the shares, which he doesn't own, ``market perform.'' ``If there just isn't a whole lot of demand, it's tough.''
Handspring, which had its initial public offering July 20, 2000, has no changes to make to the outlook given last month, when the company forecast sales of US$60 million to US$64 million, spokesman Brian Jaquet said. Last week's price cuts were factored into that forecast, he said.
``We've got to continue to innovate,'' Jaquet said. ``If we innovate, we'll make products that people want to buy.''
Handspring makes Visor computers based on Palm's operating system. Handspring Chief Executive Donna Dubinsky and Chairman Jeff Hawkins also founded rival Palm, and are known for inventing the PalmPilot.
The outlook for consumer spending is cloudy. The Conference Board's consumer confidence index fell in August to the lowest level since April. The economy grew in the second quarter at a 0.7 annual rate, the slowest in eight years.
``Palm and Handspring are really directly correlated to consumer spending,'' said Matt Finick, an analyst with Thomas Weisel Partners. ``It either translates into consumers unwilling to buy handheld computers or unwilling to pay a high price. Either way, it bodes negatively.''
Handspring, which has yet to turn a profit, is expected to lose US$0.26 a share this quarter on sales of US$71.8 million, the average estimates from a poll of analysts by Thomson Financial/First Call. In the year ago period, the company lost US$0.08, excluding certain costs, on sales of US$70.5 million. Last month Handspring pushed back its target for earning a profit to the quarter ending June 2002 from the period closing at the end of this year. The company also announced plans to fire 40 workers, or 9 percent of staff. Palm, likewise, has cut prices and fired workers. It reported a loss of US$392 million in the quarter ended June 1.
Handspring forecast spending US$60 million to US$65 million of its cash this quarter, leaving it with about US$130 million by the end of December.
``People are getting skittish about the cash outlook,'' Kim said.
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