Palm nets US$3.5 million for quarter after costs cut

Palm Inc, the world's largest maker of handheld computers, had a profit for the second time in two years as it cut costs and received a US$5 million insurance payment. The shares rose as much as 13 percent.

Net in the second-quarter was US$3.52 million, or US$.12 a share, compared with a loss of US$25.2 million, or US$0.89, a year earlier. Sales fell 8.8 percent to US$264.9 million in the quarter ended Nov. 29 from US$290.6 million a year before.

Palm marketing and other expenses as rivals, including Handspring Inc, Hewlett-Packard Co and Sony Corp, capture a greater share of the dwindling market for handhelds. Palm has tried to boost sales with higher-priced models designed for businesses and with the US$99 Zire for new users.

"The handheld industry is declining less rapidly now than it has over the last several quarters," Eric Benhamou, Palm's chairman and chief executive officer, said on a conference call.

Palm rose as high as US$2.12 to US$18.60 in after-hours trading following the release of the results. They fell US$.52 to US$16.73 by 4pm in regular trading on the NASDAQ.

Palm return to a loss in the third-quarter as sales drop from a year before, said Chief Financial Officer Judy Bruner. It will have a "modest" loss for the quarter, excluding amortization of assets and other cost, she said. Sales will be US$230 million to US$250 million, Bruner said, down from US$292.7 million a year earlier.

The computer maker's results in the most recent quarter exceeded the company's earlier expectations. In September, Palm said it would have a "small loss" on sales of US$245 million to US$265 million for the quarter. Palm's costs dropped 19 percent in the quarter from a year ago to US$264.5 million because marketing, research and administration expenses declined.

Palm a US$5 million payment from insurers during the quarter to cover the cost of a disruption to its business two years ago, when a parts supplier's factory burned down, Bruner said.

Palm's market value, which exceeded that of Ford Motor Co on the first day of trading in March 2000, has declined by more than US$15 billion over the past two years, standing at US$485 million by the close of the regular trading day. In October, it exchanged one share for every 20 owned by investors to keep the price high enough to meet the minimum value required by the NASDAQ.