Palm warns on revenue, nixes acquisition

Palm now expects revenue for its fourth quarter, ending June 1, to be in the range of $140 million to $160 million, down from its previous forecast of $300 million to $315 million. Palm reported revenue of $350 million in the same period last year.

The company's new m500 line of handheld computers is shipping later than planned, so distributors, retailers and resellers cannot reorder in Palm's fourth quarter, says CEO Carl Yankowski. That delay stalled sales of existing products in all regions, he says.

The delay in shipments accounts for most of the revenue shortfall, but the slowing economy has compounded the problem.

Palm also expects to report a bigger loss than expected, after recording a pro-forma profit last year. Pro-forma results exclude expenses such as the amortization of goodwill and intangible assets, and other one-time charges.

The company is due to report its results during the week of June 25.

Extended upended

Palm's agreement to cancel its merger with Extended Systems of Boise, Idaho, is a further setback. The merger was valued at $264 million and was expected to help Palm boost the popularity of its handheld computers among corporate users. In a joint statement last week, the companies said they have "mutually and amicably" agreed to call off the merger. They cited the slowing economy and market conditions, and said canceling the merger is in the interests of the companies and their shareholders.

Palm announced plans to buy Extended Systems in March, part of an ongoing effort to move sales of its handheld devices beyond individual users and into large corporate accounts. Extended Systems makes infrastructure software that helps make corporate software applications accessible from portable devices such as Palm's handheld computers.

At the time, Palm said the acquisition would drive the popularity of its computers by making it easier for workers to access corporate data from their Palm devices while on the road. The deal also would have given Palm access to engineers with experience in its enterprise markets, as well as to Extended Systems customers, including British Airways, Cadbury Schweppes and DaimlerChrysler.

Niccolai is a correspondent with the IDG News Service.