Palm Falls Far Short of Q4 Estimates

The handheld maker, which says earnings will be lower than previously expected, doesn't expect to make a profit until the fall.

Pointing the finger at weak demand, Palm Inc. on Thursday said that fourth quarter earnings will be lower than previously expected and that the company probably wont make a profit until the fall.

The Santa Clara, Calif., handheld computer maker said its fourth quarter revenue will be about $230 million, compared with the $290 million to $300 million the company had forecast previously.

"Demand in spring did not materialize as we had previously expected, but rather market conditions deteriorated compared to both the year-ago quarter and recent months," said Eric Benhamou, Palms chairman and CEO, in a statement. "While we remain optimistic about the long-term growth opportunities in this sector, we are disappointed that we will not meet our revenue and profitability goals this quarter."

Palm has been struggling to turn itself around since a miserable 2001, when the company had to deal with plummeting stock value, burgeoning inventory, layoffs, a botched attempt to acquire Extended Systems Inc., the sale of land once planned as the site of the companys new home, and the delayed launch of the i705 wireless device.

Then-CEO Carl Yankowski left his post last November, and Benhamou took the interim reins, promising that the company would turn itself around.

"2001 was an especially difficult year for Palm," Benhamou said in January. "We simply did not innovate enough. You should expect a steady stream of innovative solutions from Palm in the months ahead, starting with several major new products to begin shipment in the current quarter."

Benhamou had been referring largely to the i705, an "always-on" wireless data device for the corporate market that is supposed to compete most directly with Research in Motion Ltd.s Blackberry device. However, the back-end server software that supports corporate e-mail access on the i705 is still not available.