Treo Drives PalmOne Earnings Higher
By Carlo Longino, Mon Jun 21 23:45:00 GMT 2004
PalmOne reversed previous losses to turn a profit for its fiscal fourth quarter, but what comes after the Treo 600?
The company rode the popularity of its Treo 600 smartphone in North America to its first profit in some time, earning $13.3 million on revenue of $267 million, doubling analysts' profit expectations and far bettering last year's fourth quarter, when the company lost $15 million on revenue of $217 million.
PalmOne shipped 1.1 million units in the quarter, with Treo smartphones, acquired when the company bought rival Handspring, accounting for 28 percent. For the year, PalmOne sold 4.1 million units -- 100,000 less than in fiscal 2003. It sold 931,000 units in the fourth quarter of last year, before it had taken on Handspring and the Treo line.
While clearly sales of the Treo 600 and its higher margins are helping Palm, their business is still being hit by a declining PDA market. The longer PalmOne (and PalmSource) clings to PDAs, the riskier its business becomes.
The Treo 600 has been popular in North America, but that hasn't translated into global strength for the company. The device remains the company's only smartphone on the market (though it does appear to be selling off inventory of previous models), and rumors say it won't unveil a successor until the fall.
That's a really slow-moving product cycle, and risks losing the momentum generated by all the 600's glowing reviews. Remember, too, that the 600 was created by Handspring before it was bought out, and went on sale before the merger, meaning the weak-selling (and since discontinued) Tungsten W has been the only smartphone -- and that term is used loosely -- PalmOne or its predecessor has ever developed solely on its own. The company's got to prove it can come up with a winner, rather than just buy somebody else's, to continue the good results.