SUNNYVALE, Calif., Oct 01, 2007 (Press Release) — Palm, Inc. (Nasdaq:PALM) today reported that total revenue in the first quarter of fiscal year 2008, ended Aug. 31, was $360.8 million. Smartphone sell-through for the quarter was 689,000 units, up 21 percent year over year. Smartphone revenue was $302.2 million, up 12 percent from the year-ago period.

Net loss for the quarter was $(0.8) million, or $(0.01) per diluted share. Net loss included stock-based compensation expense of approximately $5.1 million, amortization of intangible assets of approximately $1.0 million, patent acquisition cost of $5.0 million, restructuring charges of approximately $6.6 million and gain on sale of land of approximately $4.4 million. This compares to net income for the first quarter of fiscal year 2007 of $16.5 million, or $0.16 per diluted share.

Net income in the first fiscal quarter, measured on a non-GAAP basis, totaled $9.7 million, or $0.09 per diluted share, excluding stock-based compensation expense, amortization of intangible assets, patent acquisition cost, restructuring charges, gain on sale of land and the related income tax provision. This compares to non-GAAP net income in the first quarter of fiscal year 2007 of $21.5 million, or $0.21 per diluted share, which excluded the effects of amortization of intangible assets, stock-based compensation and the related income tax provision.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, totaled $4.1 million. EBITDA, adjusted to add back stock-based compensation, other non-operating expense, patent acquisition cost, restructuring charges and gain on sale of land, or Adjusted EBITDA, totaled $16.7 million.

“The launch of our Palm Treo 500v with Vodafone and the Palm Centro(TM) with Sprint in September demonstrate our commitment to delivering competitive, high-quality solutions and expanding our reach to a broader market and range of customers,” said Ed Colligan, Palm president and chief executive officer. “As we move toward completing the recapitalization transaction with Elevation Partners, we are excited to strengthen our ability to accelerate Palm’s growth in the future.”

Q2 Fiscal Year 2008 Guidance

• Revenue is expected to be between $370 million and $380 million;

• Gross margin is expected to be in the range of 33.3 percent and 33.8 percent on a GAAP basis and between 33.5 percent and 34.0 percent on a non-GAAP basis;
• Operating expenses on a GAAP basis are expected to be in the range of $136 million to $139 million and on a non-GAAP basis, between $120 million and $123 million;
• The Q2 fiscal year 2008 guidance is based on a 40 percent tax rate on a GAAP and non-GAAP basis;
• Earnings per diluted share are expected to be in the range of $(0.03) to $(0.01) on a GAAP basis and $0.06 to $0.08 on a non-GAAP basis;
• Net loss on a GAAP basis is expected to be in the range of $(3.2) million and $(1.1) million and earnings before interest, taxes, depreciation and amortization, adjusted to add back stock-based compensation, restructuring charges and other non-operating expenses, or Adjusted EBITDA, is expected to be in the range of $13 million to $16 million; and
• SFAS 123R stock-based compensation expense, before taxes, is expected to be between $5.5 million and $6.0 million and amortization of intangible assets is expected to be $1.0 million. We also expect an $8.0 million to $10.0 million restructuring charge to earnings related to product postponement expenses and the organizational changes that we announced in June. These amounts and the related tax amounts are excluded from Palm’s second quarter of fiscal year 2008 outlook on a non-GAAP basis.

The guidance provided above assumes no change for the recapitalization transaction with Elevation Partners, which the company expects to complete before the end of October.

INVESTOR’S NOTE: The company will hold a conference call today at 1:30 p.m. Pacific/4:30 p.m. Eastern to discuss matters covered in this news release. Investors and other interested parties are encouraged to listen to the call by logging on to the conference call webcast prior to the start of the conference call at Palm’s Investor Relations website http://investor.palm.com. Participants will be able to simultaneously view the presentation slides during the call.

Investors wishing to listen to the conference call via telephone may dial 800.901.5231 (domestic) and 617.786.2961 (international). There is no passcode required for the call.

A telephone replay of the conference call will be available through Oct. 8, 2007. The dial-in number for the replay will be 888.286.8010 (domestic) and 617.801.6888 (international), passcode 17484531. An archive of the audio and visual portion of the conference call will be posted on Palm’s Investor Relations website at http://investor.palm.com.

An audio replay and text transcript of the conference call also can be accessed at the same URL beginning today at approximately 5 p.m. Pacific.

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Full press release on Palm.com

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