[“The launch of Palm webOSTM and Palm Pre was a major milestone in Palm’s transformation; we have now officially reentered the race,” said Jon Rubinstein, Palm’s chairman and chief executive officer.]

Sunnyvale, CA -- Palm, Inc. today reported that total revenues in the fourth quarter of fiscal year 2009, ended May 29, 2009, were $86.8 million. Gross profit was $20.1 million and gross margin was 23.1 percent. These results include the effects of subscription accounting treatment required by GAAP.(1) In accordance with this methodology, revenues and cost of revenues for the Palm® PreTM smartphone are deferred and recognized over the product’s estimated economic life.

To facilitate comparisons to Palm’s historical results, Palm has included non-GAAP adjusted measures, which exclude the impact of subscription accounting, stock-based compensation and other items detailed later in this release. The company believes this information will help investors better evaluate its current period performance and trends in its business. On a non-GAAP basis, Adjusted Revenues in the fourth quarter totaled $113.2 million, Adjusted Gross Profit was $30.4 million and Adjusted Gross Margin was 26.8 percent.

“The launch of Palm webOSTM and Palm Pre was a major milestone in Palm’s transformation; we have now officially reentered the race,” said Jon Rubinstein, Palm’s chairman and chief executive officer. “We have more to accomplish, but the groundwork is laid for a very promising future here at Palm. Our senior management team is capable, motivated and focused on execution; there is a large group of developers waiting to build great applications for Palm webOS; and we have a new product pipeline that we think will set a standard for the industry.”

The company shipped a total of 351,000 smartphone units during the quarter, representing a 6 percent increase from the third quarter of fiscal year 2009 and a year-over-year decline of 62 percent. Smartphone sell-through for the quarter was 460,000 units, down 5 percent vs. the third quarter of fiscal year 2009 and down 52 percent year-over-year.

Net loss applicable to common shareholders for the fourth quarter of fiscal year 2009 was $(105.0) million, or $(0.78) per diluted common share. This compares to a net loss applicable to common shareholders for the fourth quarter of fiscal year 2008 of $(43.4) million or $(0.40) per diluted common share.

On a non-GAAP basis, Adjusted Net Loss for the fourth quarter of fiscal year 2009 was $(53.4) million, or $(0.40) per diluted share. This compares to an Adjusted Net Loss for the fourth quarter of fiscal year 2008 of $(23.9) million, or $(0.22) per diluted share.

The company’s cash, cash equivalents and short-term investments balance was $255.1 million at the end of the fourth quarter of fiscal year 2009. This total includes the $103.5 million in net proceeds from the company’s public equity offering, which took place in March. Cash used in operations for the fourth quarter of fiscal year 2009 was $72.4 million.

Fiscal Year 2009 Results

Total revenues for the full fiscal year 2009 were $735.9 million. Gross profit for fiscal year 2009 was $159.8 million and gross margin was 21.7 percent. The company shipped a total of 2,407,000 smartphone units during the year, representing a 25 percent decline vs. the prior year. Smartphone sell-through for the full year was 2,570,000 units, down 19 percent year-over-year. Net loss applicable to common shareholders for fiscal year 2009 was $(753.5) million, or $(6.51) per diluted common share, which included a net non-cash charge of approximately $397 million pertaining to an increase in the reserves for the company’s U.S. deferred tax asset. This compares to a net loss applicable to common shareholders for fiscal year 2008 of $(110.9) million, or $(1.05) per diluted common share.

On a non-GAAP basis, Adjusted Revenues totaled $762.3 million, Adjusted Gross Profit was $171.1 million and Adjusted Gross Margin was 22.4 percent for the full fiscal year 2009. On a non-GAAP basis, Adjusted Net Loss for fiscal year 2009 was $(241.1) million, or $(2.08) per diluted share. This compares to an Adjusted Net Loss for fiscal year 2008 of $(36.2) million, or $(0.34) per diluted share.

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