Palm earnings drop 61% drop in Q3

Palm reported a 61% drop in its third-quarter profits as speculation of a buyout continued to swirl, an Associated Press report said.

The Associated Press report said sales of the company's Treo smart phones reached record levels, but increased costs, $5.7 million in stock-based compensation, and $3.7 million in acquisition-related charges hurt Palm's bottom line.

The report said for the three months ended March 2, the company earned $11.8 million on revenue of $410.5 million. In the year-ago period, Palm earned $29.9 million on sales of $388.5 million.

Excluding stock-based compensation and other one-time items, Palm said it would have earned $16.5 million, compared with $19.8 million, in the year-ago period, the report said.

The report said Palm, whose profits quintupled to $336 million in fiscal 2006, saw its income and revenue take a sharp drop last fall as it faced some execution problems and an onslaught of new competition from deep-pocketed rivals.

But Treo sales jumped 23% to a record high of $354 million in the fiscal third quarter, the company said.

The report further said rumors of a potential Palm sale rose in recent months as its competition stiffened and news of the company hiring Morgan Stanley to explore its strategic options surfaced.