Palm posts narrower-than-expected loss

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Palm, the US-based smartphone manufacturer, reported a smaller-than-expected fiscal first quarter loss reflecting strong initial sales of its Palm Pre handset.

Confirmation of the Pre’s initial market success coupled with positive comments from Palm’s senior executives, helped the shares gain 6 per cent on Thursday. The Sunnyvale, California-based company’s stock closed at $14.44 on Nasdaq and rose to $15.30 in extended trading.

Separately, Palm said it plans to sell 16m shares of common stock and that Elevation Partners, the private equity firm which already owns a large stake in the company, intends to buy $35m worth of stock in the offering.

The success the Pre and Palm’s new webOS operating system which was also launched in June, has been widely viewed as crucial for the company which has struggled for several years with its aging Treo product line and out-of-date operating system.

Palm shipped 823,000 smartphones in the quarter ended August 31, ahead of most analysts’ projections. It said “the vast majority” of those were sales of the Pre which is offered exclusively in the US by Sprint Nextel.

Last week Palm cut the price of the Pre and announced the launch of the Palm Pixi, its second device powered by its new webOS.

”We’re making significant progress with Palm’s transformation,” said Jon Rubinstein, Palm’s chief executive. “Based on sales of the Pre and the reaction to the Pixi, we are on exactly the right path,” he said on a call with analysts.

Mr Rubinstein ran the iPod business at Apple before joining Palm in 2007. He took over as Palm’s chief executive in June.

Palm reported a net loss of $164.5m, or $1.17 a share, in its fiscal first quarter compared with a loss of $41.9m, or 39 cents a share in the year-ago quarter. Revenues fell by more than 80 per cent to $68m.

Palm said it expects non-GAAP adjusted revenues to grow to between $1.6bn and $1.8bn for the full year, including $361m last quarter, boosted by strong sales from product launches with new carriers.

Doug Jeffries, chief financial officer, has said that he expects the company to be cash flow positive by the second half of next year.

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