PalmSource Reports Profitable Quarter, Job Cuts

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PalmSource Inc. has reported a fourth-quarter profit buoyed by a large asset sale gain, but said it will reorganize its sales, marketing and product development and cut its U.S. full-time work force by about 16 per cent. The company, which sells the Palm OS operating system for mobile devices, also forecast a first-quarter loss. Quarterly earnings totaled $18.3 million US, or $1.12 per share, up from a loss of $2.9 million US, or 23 cents per share, a year earlier. The results included a $26.7 million gain from the sale of its interest in Palm Trademark Holding Co. to palmOne Inc., as well as restructuring charges and other expenses totaling about $7.7 million.


Excluding one-time items, the company posted a loss of $700,000 US or four cents per share, compared with a loss of $600,000 or five cents per share, a year ago.

Revenue fell slightly to $17.3 million from $17.7 million last year. The latest results included an early buyout of a licensee’s future minimum royalty commitments for $1.5 million.

Analysts expected the company to post a loss of two cents per share, excluding items, on revenue of $17.5 million, according to a poll by Thomson Financial.

The company said Palm OS licensees shipped about 1.1 million units during the quarter, with 37 per cent in smartphones and 63 per cent in mobile handheld devices. A year earlier, the licensees shipped about 1.4 million units.

PalmSource said it plans to cut its full-time U.S. head count as part of its reorganization over the next 12 months, and recorded a $2.7 million restructuring charge for employee severance in the fourth quarter. The company said more than half of the job cuts affected middle and senior management, including three senior vice presidents.

The company said it expects to save about $6 million in salary in fiscal 2006 from the reorganization.

“By streamlining our product-development efforts and administrative functions, and combining our sales, marketing and business development activities, we not only expect to increase internal synergies between these groups, but we are also aligning our cost structure with the reality that we are in a new product development period,” said Jeanne Seeley, chief financial officer, in a statement.

PalmSource projected a first-quarter loss of 23 cents to 26 cents per share on revenue between $14.3 million and $14.8 million. The company said its forecast includes about 10 cents per share for stock-based compensation and one cent per share for amortization.

Analysts expect the company to post a first-quarter loss of two cents per share, excluding items, on $17.6 million in revenue.

For fiscal 2005, PalmSource reported earnings of $19.5 million, or $1.28 per share, up from a loss of $15.2 million, or $1.40 per share, a year earlier. Excluding items, the company posted a profit of $4 million, or 26 cents per share, up from $1.2 million or 10 cents in the prior year.

Revenue fell slightly to $71.9 million from $73.1 million a year ago.