Palm Shareholders OK a Marriage of Desperation

Overall, Palm can claim to have steadily narrowed its hardware losses in the past couple of years. In the most recent quarter ending in August, Palm Solutions (the hardware unit) posted an operating loss of $16.4 million, roughly halving the August quarter 2002 operating loss of $32.2 million.

That, in turn, marked progress from the 2001 August quarter loss of $39.4 million.

But the company remains in the red, with its path to profitability unclear.

OS On Its Own

The outlook is likewise murky for PalmSource, the new company that will own and market Palm OS, the operating system used in handhelds and smart-phone devices.

PalmSource has plenty of traction outside its parent company: In the September quarter, it drew just over half its revenue from software licenses sold to external (non-Palm) customers, including Kyocera (KYO Quote), Samsung and Sony(SNE Quote).

And the software division has managed to narrow its losses, though it's still losing money. In the most recent year ending in May, it posted a loss of $21.8 million, an improvement from the $84.0 million loss it posted in 2001.

But sales have shrunk dramatically in the past three years to $26.3 million in the most recent fiscal year, compared with $73.4 million two years ago.

PalmSource CEO Dave Nagel says the new company will focus on winning share in the GSM market, where it's a latecomer. Though Symbian has a lead in Europe, he says, "Judge us where we are in a couple of years. We haven't gotten fully cranked up in the GSM market."

PalmSource also aims to push harder into entirely new niches, he says, citing recent design wins into Tapwave's Zodiac, a handheld gaming platform that he describes as "a Gameboy grown up" and Garmin's iQue 3600, the first PDA with a GPS receiver.