Palm's fiscal third-quarter earnings report wasn't entirely lacking growth. Sales and marketing expenses increased 29%, and R&D spending rose 32%. Unfortunately, revenue edged up only 5.7% to $411 million, leaving little room for profits. Net income plummeted 61% to $11.8 million, or $0.11 per share.
In a lone bright spot, Palm's smartphone sales posted an impressive increase of 30%, moving 738,000 units in the quarter. Despite its woes, it seems the company still knows how to build solid products. But it may take a few quarters for those sales to move the needle; Palm predicts fiscal fourth-quarter revenue between $400 million and $410 million.
The bad news for Palm should be good for rivals Research In Motion
To be fair, marketing expenditures take time to gain traction, and until they do, Palm's $504 million cash hoard should help things along. In addition, it seems the company plans to announce new products during its April 10 investor meeting.
Still, Foolish investors should be cautious. Palm has been the target of intense buyout speculation, and even CNBC has joined the circus. Suspected bidders include Motorola
Despite its woes, Palm's stock has surged more than 30% since January. But traders could lose interest if a buyout doesn't materialize within the next month or so. For Foolish investors, it's probably best to sit this one out for now.
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