Palm Profits Drop 43%

Palm Inc. reported a 43 percent plunge in fourth-quarter profits Thursday after the bell, even as sales of its Treo smartphones hit record highs.

For the three months ended May 31, 2007, the company said it made net income of $15.4 million, or $0.15 a share, on revenue of $401 million. Palm earned $27.2 million, or 25 cents per share, on sales of $403.1 million in the same period last year.

Excluding items, Palm earned 17 cents a share, beating Thomson Financial estimates of 15 cents a share.

Palm says it sold 750,000 Treos during its fourth quarter for fiscal 2007, up 43 percent from the same quarter last year. The record sales, however, were not enough to offset rising costs at the company. Palm says it spent more on marketing, R&D, and "general and administrative" expenses over the quarter.

On the firm's conference call, CEO Ed Colligan promised to keep these costs in check going forward. For instance, the company is planning to outsource more development of its Windows Mobile-based devices to its original design manufacturer (ODM) partners, which actually make the gadgets.

The company, however, will launch "a range of new smartphones" over the next 12 months, according to Colligan.

— Dan Jones, Site Editor, Unstrung

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