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October 10, 2003 GMT

Handspring Narrows Its Loss

From: Ian Fried - CNet

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In what is likely to be its last quarterly earnings report before rival Palm acquires the company, Handspring posted a slightly narrower loss than a year earlier, as sales dropped sharply.

The Mountain View, Calif.-based company on Thursday said it lost $13.9 million, or 9 cents a share, on revenue of $13.1 million for the three months ended Sept. 27. In the same quarter a year earlier, the device maker lost $15.3 million, or 11 cents a share, on revenue of $54.1 million.

The company's loss of 9 cents per share matched the consensus estimate of Wall Street analysts First Call surveyed.

Handspring said sales were limited for the quarter, as it only started producing its new Treo 600 smart phone late in the quarter. Sales of the Treo line, including older Treo models, totaled $10.5 million for the just-ended quarter, while organizer and accessory sales amounted to $2.6 million.

On Wednesday, after the last quarter ended, Handspring started selling the combination phone and handheld organizer through its Web site. The company said it has started shipping devices to Sprint PCS and European carrier Orange. U.S. carriers T-Mobile, Cingular Wireless and AT&T Wireless are expected to start selling the Treo 600 shortly.

Handspring CEO Donna Dubinsky told analysts on a conference call that the company is pleased with the pre-launch acclaim the new product has received, saying the interest in the Treo 600 "is tremendous and greater than we have seen in past launches." The company plans to spend $1.5 million in advertising this quarter to tout the product, in part through an insert in business and in-flight magazines.

By the end of next year, the company said it expects that four to five top-tier carriers will be selling the Treo 600, along with about 10 lesser-known carriers.

As for the earlier Treo versions, the company said customers bought 34,000 of the devices, down from sales of 37,000 units in the prior quarter. In all, Handspring said it sold a total of 255,000 Treos through the end of last quarter.

Handspring shareholders are set to meet Oct. 28 to vote on Palm's plans to acquire the company. The transaction is expected to close shortly thereafter, assuming that stockholders approve the proposed deal, which the companies first announced in June.

Dubinsky said she is pleased with the progress of the integration planning between the two companies. "Our teams are getting along well, and the mood is optimistic," she said.

Handspring said the company currently has 232 workers, down from 246 a quarter earlier. Between Palm and Handspring, the companies have said they plan to cut 125 workers as part of the merger. During the conference call, Dubinsky thanked Handspring's workers, both those who would continue working after the merger and those who would be leaving the company.

Palm plans to merge Handspring into its hardware unit, to be known as PalmOne, shortly after spinning off its operating system unit, known as PalmSource. Handspring shareholders will get a fraction of a PalmOne share for each Handspring share they own.

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