Palm’s Fortunes Dip in First Quarter

It seems like fortune is slipping away from the hands of Sunnyvale, California, based smart-phone manufacturer Palm as the company reported a 55-cent downslide in prices per share Tuesday. The 55-cent fall equates to 3.4 percent. While this itself may not sound too bad, that it comes after losses in the first quarter this year is what must be worrying for the company.

Palm had earlier declared losses in the first quarter. It said the losses came at a time of neck-to-neck competition and a slew of one-time charges. The company reported losses amounting to $841,000, which translated to a loss per share of 1 cent, in the first quarter. Compare this with the $16.5 million profit at 16 cents a share it made one year, and the picture gets clearer.

Technically, the company has actually overshot the expectations set by analysts. The company gained $9.7 million at 9 cents a share on a continuing operations basis. This figure was 1 cent more than what the analysts had predicted. There were gains in sales as well, which registered a 1 percent rise during the first quarter. The sales figure of $360.8 million was more or less in sync with the analysts’ predictions of $360.3 million. However, the report has not been too good for the investors.

Palm has not projected too much of growth in the second quarter, surprisingly. The company’s predictions for sale seem gloomy, with a loss of 1 to 3 cents a share on a total sales volume of $370 to $380 million. The company’s profit prediction on a continuing operations basis also is a slim 6 to 8 cents a share. This is again way short of the analyst’s forecast of 11 cents a share on $413.5 worth of sales.

The one-time charges mentioned earlier as being responsible for the reduction in profit that Palm experienced included stock compensation expenses to the tune of $5.1 million. There are two other such charges as well: a patent acquisition charge worth $1 million and $6.6 million worth of restructuring charges.

One-time charges are not the sole reasons for Palm’s profit slump, either. The company’s rivals, Apple and Research in Motion, have been striding ahead at full tilt, leaving it gasping to try and catch up. The two company’s products, Blackberry from RIM and the iPhone from Apple, have both beaten Treo, palm’s product, by a fair margin.

Palm’s competitors have enjoyed mixed fortunes as well. While Apple has reported a gain of 0.3% (approximately 51 cents), ending up at $156.85, RIM has reported a loss of 2.6% (approximately $2.5 a share), ending up at $96.08. This has left analysts with the question: did it have the resources to take the other two companies head-on and improve on its current standings?