PalmSource re-org puts Linux phones first

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Jul. 01, 2005

PalmSource will cut staff 16 percent and focus solely on Linux mobile phones, according to statements in its annual report, and comments reportedly made by interim CEO Patrick McVeigh at an earnings call. PalmSource earnings rose considerably year-over-year, and the company has reportedly landed a tier-one handset customer, InformationWeek reports.

According to InformationWeek, McVeigh stated that PalmSource will ship a full Linux-based software stack for high-end smartphones in mid-May or June of next year, followed by a stack for mid-market featurephones sometime next summer. Additionally, McVeigh reportedly said that all projects not related to these two goals will be abandoned or postponed.

Additionally, the InformationWeek story hints that PalmSource may plan to include a Linux operating system with its software stack, reporting that McVeigh said, "3G devices can be expensive to develop, so handset vendors are looking for a total Linux offerings" [sic].

PalmSource's 2005 earnings improved substantially over 2004 figures. The company reported GAAP (generally accepted accounting principles) income of $19.5M ($1.28 per share) on revenues of $71.9M, up from a loss of $15.2M on $73.1M of revenue from the previous year. Non-GAAP earnings were $4.0M ($0.26 per share), up from $1.2M ($0.10 per share) the year before.

In its final fiscal quarter of 2005, PalmSource wrote down a $2.7M charge related to severance packages for a planned 16 percent reduction in force. The company says more than half of head-count reductions involved middle and senior management positions, including three senior vice presidents. The Company expects the layoffs to save more than $6.0 million in salaries in fiscal year 2006.

PalmSource announced plans to switch from PDAs to mobile phones last December, and it acquired Asian Linux phone software vendor China MobileSoft in February. In March, it joined CELF, a powerful league of electronics giants working to improve Linux for consumer devices. For more about PalmSource's Linux strategy, read engineering chief Michael Kelley's Open Letter to the Linux community, and our recent interview with Kelley and VP of Marketing John Cook at the PalmSource Developer's Conference.

The brief InformationWeek can be found here. PalmSource's annual earnings report is available here.

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