PDActions

Quarterly Revenue $388.5M, Up 36% Year Over Year; Treo Smartphone Sell-through Up More Than 100% Year Over Year

SUNNYVALE, Calif., Mar 23, 2006 (BUSINESS WIRE) -- Palm, Inc. (Nasdaq:PALM) today reported revenue of $388.5 million in its third quarter of fiscal year 2006, ended March 3, up 36 percent from the year-ago period.

"We delivered strong results this quarter, a result of solid execution against company objectives," said Ed Colligan, president and chief executive officer of Palm. "We extended our record of double-digit year-over-year revenue growth and profitability gains. Smartphone sell-through reported by our carrier partners more than doubled over the year-ago period, validating our strategic decision to support multiple open platforms and offer a choice of smartphones based on either Windows Mobile(R) or Palm OS(R)."

Net income in the third fiscal quarter was $29.9 million, or $0.28 per diluted share. Net income reflected the effect of a partial reversal of a deferred tax asset valuation allowance of approximately $13 million. This compares to net income for the third quarter of fiscal year 2005 of $4.4 million, or $0.04 per diluted share.

Net income for the quarter, on a non-GAAP(1) basis, totaled $19.8 million, or $0.19 per diluted share, excluding the partial reversal of the company's valuation allowance against its deferred tax assets and amortization of intangible assets and deferred stock-based compensation, and adjusting the income-tax provision to 40 percent. This compares to non-GAAP net income in the third quarter of fiscal year 2005 of $10.6 million, or $0.10 per diluted share, which excluded employee separation costs and amortization of intangible assets and deferred stock-based compensation.

Fourth Quarter Fiscal Year 2006 Outlook

Based on current trends, Palm provided its outlook for financial results in the fourth quarter of fiscal year 2006, ending June 2, 2006. At this time, the company expects the following:

* Revenue in the range of $400 million to $405 million;

* Gross margin between 33.5 percent and 33.7 percent;

* Operating expenses between $101 million and $103 million on a GAAP basis and between $100 million and $102 million on a non-GAAP basis; and

* Earnings per diluted share between $0.33 and $0.34 on a GAAP basis and between $0.22 and $0.23 on a non-GAAP basis, which excludes amortization of intangible assets and deferred stock-based compensation and reflects the difference between utilizing a 40 percent effective tax rate on a non-GAAP basis compared to an effective tax rate of approximately 7.5 percent to 8.5 percent on a GAAP basis.

Highlights of the Quarter:

During the third quarter of fiscal year 2006, the company accomplished the following:

* Shipped a total of 564,000 Treo(TM) smartphones. Treo sell-through reported by the company's carriers and other smartphone distributors was a record-high 569,000, up 102 percent from the year-ago period, reflecting strong demand for the Treo 650 and Treo 700w smartphones;

* Grew Palm's share of the U.S. converged smartphone/PDA market to 30 percent, up from 22 percent a year ago, according to Canalys. Palm's unit shipments grew by 111 percent compared to the overall market growth of 56 percent, according to Canalys;

* Began selling the company's first smartphone that uses the Microsoft Windows Mobile operating system. The Palm(R) Treo 700w smartphone is the first of four new smartphones the company will introduce this calendar year;

* Delivered the first Treo smartphone built to take advantage of high-speed EV-DO (Evolution Data Optimized) radios. The Treo 700w runs on the Verizon Wireless network;

* Created additional breakthrough software differentiation by providing a Palm experience on the Windows Mobile operating system. Features include the ability to dial by name or image, perform a Google web search from the Today Screen, manage multiple voicemail-box commands with VCR-like icons, and decline an incoming phone call with a quick text message;

* Increased its carrier business for Treo 650 smartphones in Latin America with Telefonica/movistar in Argentina, Chile, Colombia and Venezuela; Vivo in Brazil; and CTI Movil in Argentina. In the United States, Cellular South introduced the Treo 650 to its customers, and Verizon Wireless began selling the Treo 700w in addition to the Treo 650; and

* Hired Ronald R. Rhodes as senior vice president of Global Operations, who brings to Palm 30 years' experience in operations and manufacturing, and promoted Roy Bedlow as vice president, Europe, Middle East and Africa.

From: Palm - About Palm, Inc. - Investor Relations - Press Release

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