Palm Reports $38.7M Loss for Q1, Expects Bleak Q2

Although it reported this week a fiscal first-quarter loss that was better than what analysts expected, Palm Inc.s future is still bleak, in spite of the introduction of a new device, the m125.

The handheld leader says the second quarter, historically its strongest, will likely end in a loss as well–despite Palms recent restructuring.

Earlier in the year, Palm announced that it would be profitable by the end of the year; however, “we now do not expect to obtain this goal in Q2,” said CEO Carl Yankowski, who listed as reasons the faltering economy and the recent terrorist attacks.

In the first quarter, Palm lost $38.7 million, or 7 cents a share, on revenue of $214 million, excluding charges. During the same quarter last year, Palm had a profit of $23.9 million, or 4 cents a share, on revenue of $401 million, excluding charges.

Also this week, Palm introduced the m125, which includes a secure digital expansion slot, a Dragonball VZ 33MHz processor and 8MB of RAM. It runs on two AAA batteries and costs $249.

The company, however, is delaying indefinitely the long-awaited launch of the i705, a wireless device that was supposed to be released by the end of the year.

“We will not release this product during this holiday season,” Yankowski said, who added, “We remain convinced that wireless will take off.”

The company also reported that both Motorola Inc. and Nokia Corp. have canceled plans for wireless devices based on the Palm OS.

Yankowski acknowledged that while Palm remains the leader in handhelds in terms of numbers shipped, the company is losing some sales to hardware manufacturers that license the Palm OS.

Handspring Inc. this week introduced two additions to its Visor family of handheld devices–the Visor Pro and the Visor Neo, both of which run on a Dragonball VZ processor. The Pro, which includes 16MB of memory, costs $299. The Neo, which includes 8MB of memory, costs $199.