Palm sales surpass expectations

But tax gain masks income dip

Palm posted strong sequential and annual sales gains yesterday when it reported its Q2 FY2006 financial results. Revenues hit $444.6m, up 18 per cent on the year-ago quarter and 29.9 per cent on the previous quarter's $342.2m - and better than the firm had previously forecast.

Net income for the period, which ended 2 December 2005, was $260.9m ($5.02 per share), though $226.3m of that arose from a "partial reversal of a deferred tax asset valuation allowance", slightly less than the $240-250m gain the company forecast last quarter.

Ignore that and other one-off charges, and the figure was a more modest $24.4m (47 cents a share), down on Q2 FY2005's $27.2m (53 cents a share) but up from $21.1m (41 cents a share) in the previous quarter.

Palm said it shipped 602,000 Treos during the quarter, 81 per cent more than it did in the year-ago three-month period. The company claims a 78 per cent share of the US PDA market and a 36 per cent share of the US smart-phone arena. It said it makes eight of ten best-selling PDAs in the US.

Looking ahead, Palm said it expects the current quarter, Q3 FY2006, to yield revenues of $370-375m - post-Christmas is typically a quieter time for device makers like Palm - and earnings of 46-49 cents a share on a GAAP basis. Its gross margins will fall between 33 per cent and 35 per cent, the company forecast. ®