Palm rides Treo's success

Palm is on track to nearly double sales of its Treo smartphone this fiscal year as the PDA vendor continues to add new carrier deals to its books and expand the platform internationally. Those Treo sales drove up revenues 18% in its second fiscal quarter, which ended Dec. 2, and gave Palm a 38% share of what it called the converged devices segment in the U.S.

Palm said it shipped more than 1 million Treo devices in the first two quarters, just shy of its number of smartphone shipments for the entire previous fiscal year. Palm is continuing to ride the device's popularity by launching the Treo 700w, the first Palm device built on the Windows Mobile 5.0 operating system, and three other Treo handsets in 2006. In fact, Palm is expected to unveil its 800 series at the Consumer Electronics Show in Las Vegas next month.

Palm is quickly evolving from a PDA vendor into a cellular handset vendor. As of last quarter, 61% of its revenues came from the sale of its Treo line, compared to last year when sales were dominated by its Tungsten and Zire PDA lines. During the second quarter, Palm signed distribution deals with seven new carriers and brought the Treo to China for the first time. The new carriers are India's Hutch, TIM in Brazil, Canada's Telus Mobility, Chile's Entel, both Iusacell and Telefonica/movistar in Mexico and Alltel.

For the quarter, Palm recorded revenue of $444.6 million, up from $376.2 million the same quarter a year ago. Its earnings also drove sharply upwards as Palm reported $260.9 million in profits, compared to $24.7 million a year ago. That huge jump, however, didn't come from increased sales, but rather a $224.2 million tax benefit.