PalmOne Inc. shares soared Tuesday after the world's biggest maker of hand-held computers reported fourth-quarter results that topped analysts' targets and boosted its sales outlook for fiscal 2005.
The stock gained $7.90 (U.S.) or 36.81 per cent to $29.36 on Nasdaq Tuesday, its highest level since the company was split off from Palm Inc. last year. Earlier in the session, it was up as much as 42 per cent. Almost 40 million shares traded hands, making it the seventh-most actively traded stock on Nasdaq.
Analysts linked the upbeat forecast to rising demand for PalmOne's Treo 600 "smartphones," which combine a wireless phone, a hand-held computer, and a camera. Analysts at Bear Stearns, Morgan Stanley, and Lehman Brothers raised their 2005 profit targets, although some analysts expressed concern over the company's supply problems.
PalmOne is a "turnaround story and a potential dynamic near-term grower," said Caris & Co. analyst Darcy Travlos. She has a "buy" rating on the stock with a price of $26 a share.
The company's "smartphone" is considered by many as the best on the market, Ms. Travlos wrote. "Relative to its peers in the market, principally Research In Motion Ltd., Palm offers an attractive investment alternative in a rapidly expanding and exciting market."
PalmOne's Treo 600 "smartphones" are selling out and are on backorder, she said. Ms. Travlos assumes the company's supply constraints will be resolved, although she recognizes that the timing and degree of the constraints are a "problematic."
After the close of stock markets on Monday, PalmOne said it earned $13.3-million or 27 cents a share in the three months ended May 28, reversing a year-earlier loss of $15-million or 51 cents a share.
Excluding some costs, the company's fourth-quarter profit was 32 cents a share in quarter, more than double analysts' consensus target of 13 cents a share.
Sales in the fourth-quarter rose 23 per cent to $267.3-million from $217.15-million, and above analysts forecasts of $256.1-million.
It shipped 1.1 million Treo, Zire and Tungsten units in the fourth quarter, up 17 per cent from the previous period.
Looking ahead, PalmOne forecast a profit of between $1.15 a share and $1.25 a share for fiscal 2005 on sales of $1.21-billion to $1.29-billion. Wall Street was expecting sales of $1.16 billion.
For the current quarter, PalmOne said sales will be $250-million to $260-million, above analysts forecast of $239-million in revenue.
The company said it expects to ship between 240,000 to 260,000 new Treos in the first quarter.
Roma Luciw