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Troubled Palm pares staff to cut expenses

December 13, 2007

Palm Inc., the troubled maker of Treo smart phones, laid off about 10 percent of its work force this week to cut expenses, according to a person familiar with the situation.

The Sunnyvale-based company issued a statement Thursday confirming some layoffs were made as part of a restructuring. The person said Palm, which has a worldwide staff of 1,150, was eliminating more than 100 jobs. The person spoke on condition of anonymity because Palm did not publicly disclose the number of layoffs.

Palm’s statement said the restructuring, which also included some reassignments, was part of its ongoing effort to ”focus and better align resources behind core initiatives” and ”to ensure that our expenses are in line with projected revenues.”

Palm has struggled against stiffening competition over the past year. Some missteps, including product delays and the cancellation in September of a portable computer call Foleo, have compounded the problem.

When the company reports its fiscal second-quarter results Tuesday, it has said it will swing to a wider loss than had been expected because of yet another delay in a product launch. The company did not name the product but analysts widely believe it is a Treo model slated for a major wireless carrier.

Palm warned last week that it now expects to post a second-quarter loss of 22 cents to 24 cents per share, compared to its projection made in October of a loss of 1 cent to 3 cents per share.

Revenue is expected to land between $345 million and $350 million, below Palm’s earlier guidance of $370 million to $380 million.

The company said other factors behind the sales shortfall were an unforeseen increase in warranty repair expenses and higher-than-expected shipments of its low-priced Palm Centro smart phone, which cut into profit margins.

Shares of Palm, which have fallen more than 70 percent since October, rose 22 cents, or 4 percent, to close at $5.71 Thursday.

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