PalmSource Inc.’s stock dropped to its lowest point ever following the company’s dismal third-quarter outlook.
“Although we generally performed to our financial expectations during the second quarter, we are not satisfied with this performance,” said David Nagel, president and chief executive officer of the operating system vendor.
Personal digital assistant pioneer Palm split into two businesses last year: operating system company PalmSource and device vendor PalmOne Inc. At the time of the separation, PalmSource enjoyed a stock price of $40 per share, but it has been falling ever since. In trading after the company’s second-quarter results, PalmSource’s stock fell to a low of $11.91 per share, later leveling off to around $12.42 per share.
For its second quarter, PalmSource reported revenues of $19.2 million, up from the $16.8 million in the same quarter a year ago. The company’s net income was $2.1 million, a reversal of the $9.1 million net loss it reported in the same quarter a year ago. PalmSource scored a $2.1 million boost in the quarter thanks to a settlement with Acer Inc.
The real drag though came on the company’s outlook for its third quarter. PalmSource said it expects revenues of around $18 million, but net income of either breakeven or negative. PalmSource said it was not including any potential impacts from its recent acquisition of China MobileSoft Ltd., which has not yet been finalized. Nevertheless, the company said the acquisition would provide a “nominal” increase in revenues, but a $7 million to $9 million increase in operating expenses.
The company’s outlook contrasts sharply with analyst predictions of growing revenues and net income over the coming quarters.
“However, we did see some encouraging signs for our future, as in aggregate, our licensees reported shipping the largest number of Palm Powered smart phones for any quarter, and we continued to see a larger portion of our business come from that category,” PalmSource’s Nagel said. “We also saw growth in the Palm Powered Economy, as we added three new partners for our Palm Powered Mobile World Program, signed three new ODM partners in Asia and three of our licensees introduced new smart phones worldwide.”
Those in the industry see Microsoft Corp. and Symbian slowly overshadowing the Palm OS. Indeed, software vendors like Trend Micro have decided not to support the Palm OS-instead building Windows Mobile and Symbian versions of its anti-virus software-due to a perceived lack of demand and support for the platform.
